It’s hard to become a millionaire without income from investments, and you’ll need at least two streams of income to make it happen.
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“You can make it to millionaire status with at least two income streams, preferably more,” said Alina Trigub, managing partner at SAMO Financial. “The assumption is that you’re working full time to produce active income and then whatever you save goes toward investments, which generate the next streams of income.”
But if you’ve never built multiple streams of income before, where do you start?
Earning passive income doesn’t need to be difficult. You can start this week.
The Foundation: Your Full-Time Work
The source of all your future wealth starts with your salary. Specifically, it comes from your savings rate or the difference between what you spend and what you earn. You invest your savings to multiply, eventually generating plenty of passive income.
Entrepreneur and principal of Stellar Public Relations Brenda Christensen loves real estate investing, but acknowledges that wealth starts with good old-fashioned hard work. “To become a millionaire, you need a steady stream of income from a full-time job when you are starting out,” she said.
Trigub agreed and said, “Your W-2 should be your top priority as this is where the most money comes from and then you can start building investments.”
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Passive Income From Real Estate
“Once you have steady employment as a base for building wealth, you can then add real estate investment on top of that,” Christensen explained. “The three income streams you need to become a millionaire are real estate, real estate, real estate. I have made more money on flipping houses than any other single income stream.”
Of course, flipping houses isn’t the only way to invest in real estate. Trigub added that you should learn about active and passive ways to invest in real estate and choose what suits you best. It’s an important point. Actively buying properties as rentals or flips is only one approach.
You can also invest passively in real estate through crowdfunding platforms, private equity real estate syndications, funds and partnerships. Real estate syndications have always been a favorite way for the wealthy to invest in real estate, as they get the cash flow, appreciation and tax benefits of owning part of a property without any of the headaches of becoming a landlord.
“Keep in mind that real estate offers tax advantages that could potentially save you money and hence add to your bottom line,” Trigub said.
Passive Income From Stocks
While stocks have a reputation for growth rather than income-based returns, many still pay dividends. “Start by educating yourself as to how to invest in the stock market and learn about various pros and cons,” Trigub said.
To make income investing easier, you can buy shares in high-yield exchange-traded funds (ETFs) or mutual funds that specialize in dividend stocks. These funds help you diversify your stock portfolio without you needing to make a single purchase.
Interest Income
You can also earn passive income from interest by lending money to others. “Investments like high-yield savings accounts, CDs and bonds are safe ways to put your money to work earning interest for you,” explained Todd Stearns, founder and CEO of TheMoneyManual.com.
Don’t expect to get rich off of the interest from CDs or government bonds, as low returns mirror the low risk. But as you climb further up the risk ladder, you can earn far higher interest rates on your money.
Many investors start with corporate bonds, but you can often earn higher returns with potentially lower risk on private notes and other debt investments secured by real estate.
Business Income
Starting a business takes a lot of upfront work. But as you scale, you can delegate work to employees.
“If you have extra time and a skill set that is in demand, offer your services on the side to launch your first business,” Trigub explained. “Alternatively, build a digital product that you could sell to generate additional passive income.”
Lauren Cobello, founder of Leverage with Media, has used entrepreneurship as her primary path to wealth. “I’ve started two million-dollar businesses and the first one used three streams of income. The business I run today only has one revenue stream. I’ve found that in order to build a million-dollar business you have to get really successful at selling one thing very well.”
Plan To Slowly Expand
After you’ve built a foundation of traditional income streams, you can start experimenting with riskier ones.
“Once you’re in the game, you’ll see how easy it is to expand and add additional revenue or investment streams,” Christensen said. “I always advise investing in what you love, understand and appreciate — be it art, technology or vintage cars (a personal favorite of mine).”
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This article originally appeared on GOBankingRates.com: Why You Need 5 Income Streams Before You Can Make Your First Million
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