Home Thinking Aloud Why Diversifying Your Income Gives You More Opportunities In The Long Run

Why Diversifying Your Income Gives You More Opportunities In The Long Run


by Henry Ma, CEO of Ricoma International

One of the most common reasons why people pursue the path of entrepreneurship is to achieve the goal of financial security and independence. If the events of last year’s COVID-19 pandemic have taught us anything, it’s that anyone – regardless of role, company, industry, or region – can quickly find themselves without a job, and subsequently without a primary source of income.

Pandemic aside, other factors such as economic downturns, industry changes or fresh regulations, or even simply a disagreement with leadership can also bring about the loss of a job and the paycheck that comes with it. To add to this, going without a regular and reliable source of income means that our ability to invest and grow wealth for the foreseeable future is all but done away with. Additionally, when we are able to save more money from more than one source of income, our ability to grow wealth becomes much easier and sets us on the path towards reaching financial independence sooner, as it has the ability to open up additional opportunities for us in the future.

As such, one of the most important things anyone can do to achieve financial security and freedom is to diversify their income with additional revenue streams. While it may seem easier said than done, diversifying your income has never been easier than it is in today’s world.

In this post, I want to discuss several ways that you can diversify your income and use it to unlock a greater number of future opportunities.

The Digital Era Has Countless Options

Between online shopping platforms that creators can utilize to sell their products, websites such as Upwork and Fiverr, and other independent platforms for freelancers, the internet is abound with ways to unlock opportunities for diversified income. Whether you’re a graphic designer, writer, or even a seasoned and professional business consultant, it’s never been easier to advertise your services online and make income from them.

The best part? Most websites that allow independent freelancers to advertise their services are free to use. Similarly, because you can decide which projects or clients to take on as an independent freelancer, you can essentially set your own schedule. For those who are unable – or simply don’t wish – to give up their 9-5 day job, this means that you can easily plan out your daily or weekly schedule to best suit the demand of work from your side-hustle. By diversifying your income in this way, you can also more easily begin building a solo brand and online presence for yourself, which is vital to unlocking future opportunities for your professional career.

Diversified Income Equates to Less Risk

We’ve all heard the old phrase, “don’t put all your eggs in one basket.” Though this phrase can be broadly applied to an array of scenarios, it is most true regarding personal finance and income. Just like you shouldn’t go “all-in” on a gamble you weren’t sure you were going to win, nor should you place all of your income into one investment in the case that investment turns sour in the future.

Allow me to clarify by asking a theoretical question: how did you spend your COVID-19 stimulus checks? If you, like many others, used them immediately to pay off debt or purchase goods, that money likely left your bank account as quickly as it entered it. However, if you managed to invest even a portion of that money into stocks, savings, retirement, or other accounts, that money was able to immediately go to work for you by slowly accumulating interest and growth. When you are able to diversify your income, you are simultaneously able to diversify your investments, which is crucial in unlocking additional financial opportunities for you in the future.

To put it another way, let me use a hypothetical example: let’s imagine that it’s 1998. You work a 9-5 office job but make some spare cash selling baked goods to your community, and have managed to save up $1,000 from it. You decide to invest that money in four different companies – Google, Amazon, Apple, and Microsoft – by placing $250 in each company. Today, those investments would be worth well over $1 million total in 2021. On the opposite end of this example, if you had invested the entirety of that $1,000 in Blockbuster, this one investment would have been essentially worthless after Blockbuster filed for bankruptcy in 2010.

Diversified Income Protects You Against Crises

Just as diversifying your income can create a less risky revenue stream or investment portfolio, it also helps provide security and stability in the face of potential (or inevitable) crises. The COVID-19 pandemic is just one example of a crisis that forced millions to empty their savings or dip into their retirement or investment portfolios. Other crises, such as unexpected job loss or medical emergencies, are much more common examples of crises that a diversified income can better help protect you against.

According to Angela Moore, a certified financial planner and founder of the Modern Money Advisor, a diversified income, “can help provide stability and hedge against income loss due to layoffs, illness, disability, discrimination, and more,” in addition to having, “…an incredible impact on your ability to build wealth and/or fund retirement.”

By diversifying your income, you can become better financially prepared for future crises on top of possessing additional means to save personal funds and invest for retirement. The point here is, the more you are able to diversify your income, the easier it is to save and prepare for life’s inevitable downswings. The more you can save and prepare for these unexpected caveats, the more opportunities you will have to further diversify and grow your wealth in the future.

Gain an Advantage During Economic Downturns

Similar to how diversifying your income can better protect you against crises, it also serves as a means to be better prepared for economic downturns, as we saw both during 2009’s Great Recession and 2020’s COVID-19 pandemic. According to Pew Research Center, almost one-third of U.S. employees either lost their jobs or took pay cuts resulting from the COVID-19 pandemic as of May 2020. A month later, the National Bureau of Economic Research (NBER) officially declared that the U.S. had entered a recession in February of 2020.

In times such as economic recessions, few others will be spending or investing money as they are more focused on preserving their primary (or, more often, sole) source of income. As such, stock prices tend to dip below average, and many companies and brands tend to offer major discounts on their products or services to keep their own businesses afloat. These provide opportunities for those with diversified income to take advantage of economic downturns, as they are able to invest more money at lower costs, meaning a much higher potential ROI in the long run.

Diversified Passive Income Grows Wealth While You Sleep

When we think or talk about “diversified” income, we are primarily discussing two types of income: active and passive.

Active income is defined as income that you make from a job working for an employer, or revenue you earn from operating your own business. Passive income, however, is defined as income that provides you with cash flow almost fully-autonomously, such as income made from leasing or renting real estate property, creative royalty payments, or dividends from investments.

Diversifying your income by seeking additional sources of active income – rather than passive income – requires additional commitments in regards to your time, availability, and resources. For instance, working as a ride-share or delivery driver after your 9-5 job still requires you to actively participate in your work to earn extra income, whereas diversifying your income with sources of passive income allows you to maintain your regular source of income while earning extra money at the same time.

The only caveat to diversifying your income with sources of passive income is that they tend to require larger monetary investments up-front, such as purchasing real estate property or acquiring a fleet of vehicles your side business can use to make more deliveries more quickly.

Achieving Financial Autonomy

Overall, the ways by which you decide to diversify your income greatly depend on your unique situation and circumstances. If becoming a driver for Lyft or Uber Eats isn’t accessible due to a lack of time, then starting your own digital or online business may be the better option. Likewise, if you don’t have the financial resources or capacity to invest in higher-ROI sources of passive income, don’t try to bridge the gap by taking out loans or maxing out your credit cards as this can rapidly lead to increased debt or broader personal financial issues.

The bottom line is that possessing diversified sources of income is one of the best ways to protect yourself financially, as well as one of the quickest ways to achieve financial security and independence. The commonality in deciding which way(s) you want to diversify your income is that it is a mentality shared almost unanimously by millionaires and billionaires around the world.

As a final note, remember that even though “time is money,” as they say, your time is the most precious resource you have at your disposal. Your finances are secondary. Diversifying your income without risking or jeopardizing your primary source of income is the truest way to achieving financial independence and unlock additional opportunities in the future to continue growing your personal wealth.


Henry Ma began his career in the finance industry with Investment Banking at Goldman Sachs. Joining Ricoma International in 2015, Ma recently grew into the CEO role after helping the company quintuple its revenue in five years as COO. Ma hosts the Apparel Academy show on YouTube and is continuously striving to be a thought leader on entrepreneurship, digital marketing, and social media.