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Coronavirus: Danger of our single income source

By Gbenga Adebambo
21 March 2020   |   4:20 am
There is a high probability of tough times ahead for Nigeria and Nigerians. China, the powerhouse of commodity goods, is shut down, Europe is shutting down, United States...

“ When the panic subsides, the most prepared will thrive” — Darren Hardy

There is a high probability of tough times ahead for Nigeria and Nigerians. China, the powerhouse of commodity goods, is shut down, Europe is shutting down, United States (US) is shutting its borders and the rest of the world is not left out.

The messenger of death called Coronavirus has invaded some African countries. Though Nigeria appears to be safe, but without selling our crude oil, we are economically enslaved. The naira is crashing day by day and at the time of writing this piece, it is N420 to a dollar.

Countries that are highly dependent on oil are increasingly becoming unable to meet financial obligations. At current prices for crude oil, Iraq is earning about half the $6.5billion it needs every month to pay its civil servants, and the trend is also affecting other countries that depend solely on oil to meet financial obligations, with Nigeria one of the worse hit in Africa.

The outcome is that governments might soon be unable to pay salaries and anybody depending on salary or any single sourced income would end up becoming an endangered species.

The virus is not only ravaging our health, it is also ravaging our economies. With the recent crash in global oil price from $65 per barrel a few months ago to just $28 per barrel, it has become glaring that this year’s budget would suffer a major setback. The oil price crash is the sharpest decline since the 1991 Gulf War.

Sinking demand due to coronavirus concerns, which has in turn led to a series of price cuts, is fueling the losses. Whether individually, corporately, institutionally or nationally, sustainability and stability would continuously be elusive until we break through the barrier afforded by depending on a single source of income.

To develop economic immunity against the dreaded virus, we would have to create multiple streams of income, shift attention to local production and curtail our unbridled taste for foreign goods.
In this perilous time of Coronavirus invasion, we need to know that it is not only a threat to our health, but also to our financial wellbeing.

The Bible warned us of this impending threat in Ecclesiastes 11:2 (NIV) by saying: “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land.” Having multiple streams of income is expedient in the times of disaster, especially the one we are presently in.

The biggest factor preventing many people from adding extra streams of income to their life is the misconception that to earn an extra line of income, you need to devote an extra full-time job’s worth of time and energy to a different profession. That is simply not true. You can earn streams of income while working on your present job. You just need to be more digital, flexible, strategic and dynamic.

The average millionaire has eight sources of income, including:

1. Earned Income
Earned income is the money you earn by doing something or by spending your time, for example, the money you make in your job or the salary you get by working for someone else.

This is where your quality of life would suffer the most, because you would be trading your time for money. In most cases, jobs would pay you just enough to stay over broke. This income type can become so uncertain if that person becomes long-term ill and couldn’t work.

Sometimes, people may lose their job in the face of economic depression and this can become so tragic for a family that is totally dependent on this.

Earned income is definitely needed, but should not be solely relied upon.

2. Profit Income
It is the money you earn by selling something for more than it costs you to make. Profit income is literally anything when you sell something you paid less to buy or create in the first place. You need to be an entrepreneur to earn profits.

Most of the people who are in job and are used to the ‘Earned Income’ want to move to this category at some stage of their career or life, but find it difficult to make the move, primarily because of lack of guts to take additional risks.

3. Interest Income
Interest Income is the money you get as a result of lending your money to someone else to use, for example, putting it in the bank, lending it to the government in the form of buying treasury bills, etc.

Many people put the money they have spared from working all their life into a bank to build on the interest and live off of it when they retire. The truth, though, is that this strategy is just nowhere near as good, except for the fact that it is less risky.

Many of these other income streams are much more likely to give a great return on your money than a bank ever would. Sure, the alternatives may require a bit more work and is slightly riskier, but the returns outweigh those risks.

4. Residual Income
This is the type of income whereby you continue to get paid for doing something long after it is done. The dawn of the Internet has really boomed this type of income.

One of the best examples of residual income is writing a book. Think about it; it may take you months to write a book, but when you finish writing a book and as long as you keep getting sales, you are getting paid for that work already done.

The most fascinating thing about this income type is that you are no longer selling your time. You are instead selling your ideas, thoughts and experiences and getting a consistent income from it, even long after you are dead.

5. Dividend Income
This is the money you get as a return on shares of a company you own. It also makes you a shareholder of a company. Next to bank interest, this is probably the most commonly known investment strategy, but one that has high entry barriers and also one of the more risky in this list.

However, with the right education and market conditions, investing in stocks can strongly contribute towards your financial future and security. Just be sure to invest carefully and test the waters before investing hugely in it.

6. Rental Income
This is the income that you get as a result of renting out an asset (a property or real estate) you have, like a house, building or a property. It is a safer and more reliable stream of income. It could be commercial property, like offices, residential building or renting out a land for agricultural purposes.

This stream of income is highly sustainable, because there would be a strong need for rental real estate, whether it is a startup business looking for an office or a family looking for a house to rent.

7. Capital Gains
This is the income you get as a result of increase in value of an asset you own. For example, when you buy shares at $10 and sell them at $11, the $1 difference is capital gain, or if you buy your house for $200,000 and sell it for $220,000, the $20,000 extra is your capital gain.

The difficulty here is that a lot of items we buy on daily basis do the opposite of this, as they go down in value. A great example of this is cars. About 99 per cent of cars go down in value from the day you purchase it. The most reliable, secure and profitable example of capital gains is owning real estate. Property has consistently risen in value over the last century and would continue to do so.

8. Royalty Income
This is the income you get as a result of letting someone use your products, ideas, inventions or processes. The opportunities for ‘Royalty Income’ have really boomed in the information age. It is common for people to sell Rights to a book they have written or an online course they have created.

Franchises are arguably another example of doing this, in exchange for money today and consistently for the long-term, you can sell a template for a proven business model, alongside other resources, experience and even clients. The biggest challenge here is to create something unique and then make it repeatable.

One of the wisest millionaires in the world, Warren Buffet, said: “Never depend on a single income. Make investment to create a second one.” You would hardly find any wealthy billionaire with an income stream only from the ‘Earned Income’ category. The reason for the same is very simple: This stream is where our time utilisation is least efficient and since there is a limit to the number of hours we can put in a day, there is also a limit to the amount of money we can earn from this stream of income.

So go on, choose your streams. If you desire to protect your family from the unknown, having multiple streams of income is non-negotiable.