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.