The problem with trying to build multiple sources of income
2 min read

The problem with trying to build multiple sources of income

Most people I come across on Twitter these days are preaching about how building multiple streams of income is the way out of the rat race of 9 to 5. And this seems to be accepted as Gospel by many people who then try to do what their gurus just do-buying courses on how to make money by selling info products, or whatever. I can understand the logic behind this idea. The more diverse your income stream is, the more safe you are and the more money you can make.

But I think this is dangerous advice. The instant you start dreaming about building multiple sources of income, you are throwing the idea of compounding out the window. One of the most basic concepts of building wealth is the compound effect. Unless you are working a 9-5 and are living off a monthly paycheck, wealth doesn't grow in a linear fashion. It's usually non-linear and definitely exponential when you consider a larger timeframe.

People pay you good money when you have mastery over certain skills. If you want to make serious money, you need to attain mastery of what you do. What you do doesn't necessarily have to be a very primitive skill. These days, it's more likely that you are in demand if you are good at a compound thing that involves a few different primitive skills. But if your main focus is on building multiple streams of income, you don't have enough time to attain mastery at any single thing and you are missing out on a lot of potential.

You are not letting the compounding effect be your ally and you will be making way less money than you potentially can.

So is trying to learn to make money through multiple streams a bad thing?

If your goal is purely building wealth, it's bad. You will essentially be distracted by a bunch of different things and it becomes very difficult to focus. As the 80/20 principle states, 80% of your wealth is going to be generated by 20% of your income source. So, if you have 5 different streams of income that you have already built or trying to build, you'd be better off focusing on that one stream of income that's going to generate the most profit for you. This is how you optimize your time and energy. Once you have that one activity alone to focus on, you can start getting better at it and attain mastery of it. Now the compounding effect starts kicking in after a while and you'd be making 5x, 10x or even 100x more money from that one activity than you would otherwise be making from the 4 other income streams.

But if your goal is to learn new skills by doing different things, there's nothing wrong with that. But you shouldn't be afraid of cutting out focus from any single source if it's something you don't want to focus on after a while but it requires some level of maintenance. After all, there's no stream of income that's 100% passive.