In fact, the average millionaire is said to have at least seven income streams. In this guide, we will explore each of these streams, their pros and cons, the effort and capital required, and how Filipinos can apply them in real life. Whether you're a beginner or already on your financial journey, understanding and implementing these strategies can bring you closer to financial independence.
1. Earned Income – Your Salary or Wages
Earned income is the money you receive from working a job, whether as an employee or a business owner actively involved in operations. It’s the most common income stream and serves as the foundation for most people’s finances.
Pros:
✔ Provides stability and security
✔ Often comes with benefits like health insurance and retirement plans
✔ No capital needed—only skills and experience
Cons:
✘ Limited by time and energy (you can only work so many hours)
✘ No passive growth—income stops when you stop working
✘ Subject to job market conditions and economic downturns
Effort/Capital Required:
Requires education, training, or skills
Higher salaries often demand advanced degrees or certifications
Can be increased through promotions, side jobs, or salary negotiation
Example:
John is a software engineer working for a multinational company in BGC. His monthly salary allows him to cover his expenses and save for future investments.
2. Interest Income – Earnings from Your Savings
Interest income comes from savings accounts, time deposits, and other fixed-income instruments. It is one of the safest income sources, but it usually provides low returns.
Pros:
✔ Low risk, guaranteed returns
✔ Requires little to no effort
✔ Useful for emergency funds and short-term savings
Cons:
✘ Low-interest rates, often below inflation
✘ Not a significant income source unless large amounts are invested
✘ Can be eroded by bank fees and taxes
Effort/Capital Required:
Requires initial capital (savings)
The higher the deposit, the higher the earnings
Options include savings accounts, time deposits, and government bonds
Example:
Maria maintains a high-yield savings account that generates interest. However, she realizes that relying solely on bank interest won't be enough to grow her wealth.
3. Profit Income – Earnings from Business or Side Hustles
Profit income is earned from running a business, freelancing, or engaging in side hustles. It involves actively selling goods or services for profit.
Pros:
✔ Unlimited earning potential
✔ Can turn into a scalable business
✔ Full control over income growth
Cons:
✘ Requires effort and capital to start
✘ Business risks and potential losses
✘ Can take time to become profitable
Effort/Capital Required:
Can start with low capital (e.g., freelancing or dropshipping)
Higher capital needed for businesses requiring inventory or a physical store
Requires strong marketing, sales, and management skills
Example:
Miguel started an online business selling locally sourced products. Through effective marketing and networking, his side hustle became a full-time business, generating consistent profit.
4. Dividend Income – Earnings from Investments
Dividend income is generated from investments in stocks, mutual funds, or Real Estate Investment Trusts (REITs) that pay dividends. It allows you to earn money passively from company profits.
Pros:
✔ Passive income once invested
✔ Can grow over time through reinvestment
✔ Tax-efficient, with some dividends being tax-exempt
Cons:
✘ Requires capital to start
✘ Stock market fluctuations affect returns
✘ Companies may cut dividends in bad times
Effort/Capital Required:
Requires knowledge of investing
Capital needed varies; some stocks allow investment for as low as PHP 1,000
Best suited for long-term investors
Example:
Sofia invests in dividend-paying stocks on the Philippine Stock Exchange (PSE). Every quarter, she receives dividend payouts, adding to her passive income.
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Click here to sign-up for FREE!5. Rental Income – Passive Earnings from Properties
Rental income comes from leasing real estate properties. Many Filipinos invest in real estate to generate passive income through rentals.
Pros:
✔ Generates steady cash flow
✔ Property value can appreciate over time
✔ Can be passed down as generational wealth
Cons:
✘ Requires significant capital for property purchase
✘ Managing tenants and maintenance can be challenging
✘ Income may be inconsistent due to vacancies
Effort/Capital Required:
Requires significant investment for property purchase
Can start small by renting out spare rooms or co-living spaces
Requires management skills or hiring a property manager
Example:
Carlos owns a condominium unit in Metro Manila. By renting it out, he earns a steady stream of income that helps pay for his mortgage and builds his wealth.
6. Royalty Income – Earnings from Intellectual Property
Royalty income is earned by licensing your creative works, such as books, music, photography, or software.
Pros:
✔ Passive income once created
✔ Can continue earning for years
✔ No physical inventory needed
Cons:
✘ Requires creativity and intellectual property rights
✘ Can take time to gain traction
✘ Competition in digital markets
Effort/Capital Required:
Can start with minimal investment (e.g., writing a book or creating an online course)
Requires marketing to reach a wider audience
Example:
Andrea is a songwriter whose music is used in commercials and films. She earns royalty income every time her songs are played or purchased.
7. Capital Gains – Profits from Selling Assets
Capital gains income is earned when you buy assets (like stocks, real estate, or businesses) at a lower price and sell them at a higher price.
Pros:
✔ High potential for profit
✔ Can be tax-efficient
✔ Works well for long-term investors
Cons:
✘ Requires capital to invest
✘ Market fluctuations can lead to losses
✘ Not a steady income stream
Effort/Capital Required:
Requires investment knowledge
Best for those with a long-term financial strategy
Example:
Ricardo invests in stocks and mutual funds. Over time, their value increases, and he sells them at a profit, earning capital gains.
Taking the First Steps Toward Financial Freedom
Building multiple streams of income is a powerful strategy to achieve financial security and long-term wealth. However, getting started can feel overwhelming. Here are some actionable steps you can take today:
Assess Your Current Income: Identify your main income source and see where you can make improvements. Can you negotiate a raise or start a side hustle?
Start Small: Don’t try to build all seven streams at once. Pick one additional source of income that aligns with your skills and resources.
Educate Yourself: If you’re interested in investments, rental income, or business, take time to learn through books, online courses, or financial seminars.
Set Financial Goals: Whether it’s earning an extra PHP 5,000 per month or saving for a property, having clear goals will keep you motivated.
Take Action: Open a high-yield savings account, invest in your first mutual fund account, or start selling products online. The sooner you start, the sooner you’ll see results. Remember, education without execution is just entertainment.
Financial success doesn’t happen overnight, but by taking small and consistent steps, you’ll be well on your way to creating multiple income streams and securing your future. What will your next income stream be?