The way we use money in our lives is strongly determined by the input of our income. For most of us, our income derives from an active income which is our job. This is the mainstream of earning a living – or at least that was what I was taught, until one day, I realized the vulnerability of an active income.
If you are highly dependent, like me, on one source of income to live, then you should read on to understand why you actually need a second income on top of what you are earning right now.
(1) Economic Inflation
Where there is economy, there’s bound to be inflation, but it isn’t entirely a bad thing. Some argue that moderate inflation can boost economic growth and increase average wages. However, it can be a major problem when inflation rapidly exceeds the average income growth.
Now, we have to spend more on daily expenses when we would have spent less before. We have to prioritize our spending (which is actually a good habit), but at the same time, we will also have less flexibility with lifestyle and accumulate less savings for retirement.
It would be great if income growth is parallel with the rate of inflation, but we know that isn’t going to happen anytime soon. Will a second income help in this situation? Most definitely because it will elevate our income level to meet the rising cost of goods and provide us with a better lifestyle.
(2) Debt Accumulation
As a result of inflation, most of the times, we try to increase our spending capacity through the “spend now, pay later” mentality. In other words, we are putting ourselves into the debt zone. Paying later always comes with interest rates and we could actually be spending more than we should.
However, some debts that come with education loan or mortgage expenses are inevitable. So how do we keep up with the bill without having to lose our home, declaring bankruptcy or putting our family through hardship?
Learning how to control our expenses and creating a reserve fund can help to pay off these debts in the long run without affecting our household income. The earlier we practice these good financial habits, we’ll be better prepared to face the burden of debt.
(3) Job Security
By understanding how the economy and debt affect our spending, the next question to ask is how secured is our income source which is our current job employment. We already know that income growth is slower than economic growth, but in order to maintain a stable income, we need to constantly polish our job skills so that our position isn’t easily replaceable by other (potentially more capable) job seekers.
We also need to ensure that our businesses make profits so that we can earn the promotion that we deserve. However, what if;
- You lose the job due to retrenchment?
- You can’t compete with the newcomers?
- Your health is compromised and you can’t no longer work?
Whether you are affected or not, these are the realities of job employment that we are currently facing. Should you lose your job under those circumstances, do you have other jobs to fall back on? If you don’t, then you have better start creating a second income while your current employment is still secured.
(4) Financial Freedom
Last but not least, the much sought after goals in life – financial freedom. It sure sounds like a comfortable place to be, doesn’t it? In essence, financial freedom is far more than being financially rich. It’s about wealth creation that consists of health, happiness and legacy to pass onto the next generation.
Financial freedom doesn’t happen overnight. It requires sound financial planning at an early stage and especially when everything is looking smooth in our lives. Why do I say so?
Because if you are only learning to swim when you are sinking, you are too late. Financial frustration will only lead to wrong decision-making and put you through the vicious cycle of debt that you struggle to avoid so much.
So while you are not facing too much trouble in life, commit some time to analyze your current and future cash/income flow and make adjustments where it is necessary. You will eventually identify the need for a second income and the various ways you can optimize to achieve your financial freedom.
Start an Online Business to Generate More Income
Don’t spend your entire life working for money. Make money work for you through a second income so that you won’t be;
- Affected by the economic inflation.
- In trouble with debts.
- Worried about losing your job.
A great way to achieve this is by starting your own online business because there are plenty of market opportunities to tap into and with current technologies, anyone can get started easily. If you are interested to know how this works, check out this awesome training that teaches the fundamentals of becoming an online entrepreneur.
You won’t get rich overnight, but you can certainly create a successful business that generates long term income by following the program. Do you have any thoughts or questions about creating your own second income? Please leave your comments below and I’ll help you out.
It is a sad thing that in school we are not taught nearly enough about the fundamentals of managing money. The way we spend money is also tied into our emotional well being. If we are feeling happy in life, we are likely to be managing our money better and value it more and therefore do smarter things with it.
But in today’s changing times, I think no one can afford to think they will only ever need one source of income, and there has never been a better time to tap into the online world and explore the array of possibilities that exist. Good article, and highly relevant to the changing times.
Hi Kathy,
Really great read and some solid advice and reasons why we need a second income. It is actually sad to think how many people life pay check to paycheck without foreseeing for their future. The points that you list here make a lot of sense and would make for a more comfortable living. Job security really stood out for me because today there are so many more youngsters coming in with knowledge that many of us had to teach ourselves at a later stage.
Hey there Xander,
I think this article is going to resonate with most youth these days, especially those who think that a college degree is sufficient to give you a good job security. The reality is a far cry than what you would expect. What is thought at school can surprisingly throw you back several years because rigid curriculum don’t often follow the current trend of things.
For me, I have to admit, my want for a second income is purely to fund my personal passion of travelling the world!! 😀
The reasons you give in this article are great reasons to start working towards this goal (particularly debt accumulation… I tend to feel trapped when I’m in any kind of debt!!)
“If you are learning to swim when you are sinking, you are too late”. What a great quote! It’s such a shame that so many people my age don’t really have a clue about credit card debts etc, although they are deep into it without really understanding the consequences.
Thanks for sharing!
Hi there Zoe,
Sounds like you are an avid traveler. That makes the two of us 🙂 In your case, it would be best to create a travel blog and monetize from it. There are a lot of travel and vacation affiliate programs that you can join, but they do require your site to have some traffic first.
I like to think that you are ahead of your peers when it comes to planning for a second income. If you follow closely the activities and training at Wealthy Affiliate, you would have known that hard works do pay off. It’s just the matter of time.
I just finished reading your post titled, “Why You Need a Second Income.” I wish that our income would rise along the lines of inflation but we know that is a myth. I’m 58 years old now and I have many experiences. The economy has been lagging now for quite some time.
Although it has gotten better, it is still lagging. You can cut back on your spending only so much. A second income is necessary in today’s economy. Back when I was young, the man worked. One income was enough, not so today.
Building an online business is the way to go and Wealthy Affiliate is the place that I would recommend anyone to get started.
Thank you for your comment Mijareze. Your experience clearly remind us – the younger generation – to seize whatever opportunities that come by our way. The internet is a big part of our lives and creating a business website is as easy as using a smartphone these days. In a few more years, we can expect more people embracing online entrepreneurship and making a good living out of it.
Hi Cathy,
I agree with you. In this present economic environment, a second income is needed. You gave several reasons why this is needed like inflation, debt accumulation, job security and financial freedom. I can certainly identify with them.
What would you recommend in terms of starting a second income? Thanks.
Welcome to my blog Rodney.
First thing first – approach the concept of second income like you would in starting a business. Plan what you want to do and put them in a feasible timeline. Cultivate positive mindset and habits to help you achieve these tasks daily.
Next, you should check out how I started my online business with Wealthy Affiliate because they have one of the best training that can teach you the skills and knowledge to become a successful entrepreneur. Their programs are self-paced so if you can take a few hours everyday to just learn something, you can become a business owner in several years.
This is a great post. It is very important in todays lifestyle to have a second income. You just don’t know what tomorrow might bring. I did this with Wealthy Affiliate also. And now I am building a third income stream so they can compliment each other. I joined Wealthy Affiliate in July 2013. It is the best place online to create a full time income online.
I barely started my second income stream and you already have your third one going. I have a lot to learn from you Pauric. If I had realized the importance of multiple stream income during college, I would have started on something sooner as I had plenty of time back then to venture into any business opportunities.
Oh man this is so true! Most people don’t know how or can’t afford to get into secondary investments or set up other streams of income. They rely on income from a primary job all their lives and when that’s all said and done, IF they make it to retirement, they barely have enough to get by on.
I’m middle aged and semi retired myself (meaning unemployed in a situation where I can’t get out and work). But I am so glad I found Wealthy Affiliate! It is giving me the opportunity to learn how to create a business from home.
I’ve only been a member for about 3 months but I knew enough about what it takes to earn money online and to know that Wealthy Affiliate is the real deal. It’s only a matter of time before I am earning money from my endeavors.
If I hadn’t been wasting so much time with other endeavors, I would probably already be making money today.
Thank you for sharing your personal insight Randy.
I think the young generation needs to sit down more often with semi retired people over a cup of coffee. That way they can learn to project themselves 10-20 years down the road, change their current mindset and make better investment decision for their future. I have been blessed with some good advice and I am glad to have taken this path of starting my online business early in life.