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If Your Salary Is Your Only Source of Income, You’re One Step Away from Poverty

by | Apr 24, 2023 | Income Streams, Money

This isn’t about salary shaming.

Let’s get that straight. It’s about paying attention and noticing the change that’s happening. A salary isn’t going to be the dominant way we make money anymore.

  • Companies are tired of paying for a lack of results.
  • Employees are tired of being underpaid when they outperform

The solution is likely to be that most of us become one-person businesses. I think we’re already there and a salary is simply payment from your first customer. Some disagree.

Either way, Warren Buffett said:

If your salary is your only source of income, you’re one step away from poverty.

That should terrify and excite you if you only have one income source.

One income is one step away from a kick up the ass

I had a call yesterday with a guy I met on Twitter.

He told me he spent the last 18 years working for a US tech insurance company. They offer customers who buy phones insurance.

When people pay to have insurance for their phone it gives the telecommunication company better margins. We now change our phones less so these phone companies are struggling to make money.

So the telecommunications company put pressure on the insurance company to charge less. That squeezed his employer’s profits and forced them to lay people off. He had to fire three of his team a few months ago.

Yesterday he got fired himself after 18 years.

The whole time he lived just one step away from a kick up the ass and a mediocre severance package. Now he’s lost his identity. He doesn’t know what to do with himself.

“How can I opt into this way of life again knowing what I now know?”

That’s what he asked me and it’s a great question. Answer: you can’t. You’ve gotta be smarter and understand the layoff model connected to salaries.

The biggest economic misunderstanding of my childhood was that people got rich from high salaries — Sam Altman

Here’s how to get a second, third, fourth, and tenth income stream so an employer becomes an option, not a must.

“Divorce your time from your income”

(Jack Butcher)

The #1 problem with a salary is it’s attached to your time so it’s not scalable. That’s what people often don’t get.

It’s not about me being a smartass, it’s just a fact. There are only so many hours in the day. So your salary continues for as long as you have time.

If you get sick, a major family issue happens, or you die, then that salary comes into question. Yes, you get some leeway from an employer.

But they won’t bankroll you for 3 years if a major tragedy strikes that’s out of your control.

The answer is to earn money from time to begin with, then find ways to invest your time into new income streams that don’t require time.

If you can’t work then the non-time-based income streams become a caring parent that’s there to support you.

The best income streams are digital products and services

Sure, they require time to start. But once the flywheel is spinning you can take a step back and let the income roll in.

Some call this passive income but I wouldn’t dare use that phrase out of fear I’ll be burned at the stake 🙂

This is the power of multiple income streams

We all need the first income stream to create stability.

If you’re not an entrepreneur then a job is fine to access it. But to have the energy and willpower to build a second income stream you need to know why. Writer Michael Lim put it like this:

The second source of income will change your psychology. And the third source of income will change your life.

The point isn’t to get a second income stream and brag. Or share screenshots of your Stripe dashboard like a dumbass.

It’s to get even the smallest second income of $5 a month so that your mindset changes. Believing it’s even possible is half the battle.

Once the impossible becomes possible it’s much easier to keep building.

The boogie monster of multiple income streams

Salaries are addictive because the amount is consistent.

You can predict what you’ll get paid so it’s easy to get a mortgage and pay for a car. With second and third income streams they often fluctuate a lot.

Sometimes what you do online will do well. Other times you’ll have a quiet month. This used to scare the crap out of me. Not anymore.

Daniel Vassallo taught me fluctuating incomes make us smarter. They tell us when to work more or less. They validate if what we’re doing is good. And they tell you who’s in control — you.

It’s hard to change a stable income. It’s easy to change a fluctuating income. (I love this reframe.)

If you can deal with the initial stress of income ups and downs, you’ll become mentally tougher to deal with harder financial situations later on. Build your financial mindset, as they say.

Understand “The Comfortable Pain Principle”

MJ DeMarco once said:

“Give a man a comfortable job that pays just enough to provide mediocre comfort and I’ll show you a man who won’t change a damn thing.”

Multiple income streams that go up and down are uncomfortable. But discomfort keeps us adaptable to change. We retain our mental liquidity and can come up with new ideas to make money easier when it’s needed.

The alternative is to choose the comfortable financial path.

But when a storm comes, it’ll have been a long time since you’ve had to hunt for your food again. Therefore, the storm will either destroy you or make you scared enough to get a lower-paying job out of fear.

Choose the discomfort of multiple income streams.

The easiest way to start on the path to multiple income streams (without being a Lambo Bro)

Let’s finish here.

Where do you start? By starting slowly. Multiple income streams expert Mark Manson provides a framework (hat-tilt Julia Blum):

To monetize effectively, you focus on growing your “cash cow” with 80% of your time and explore new income sources with the remaining 20%.

So you keep the job or your business for 80% of your work time, and you do income stream exploration for the other 20% of the time.

This translates to “make multiple income streams a side hustle.” The first new income stream you try won’t make you a millionaire.

But it will set the wheels in motion. And most importantly, get you thinking differently, making you open to new possibilities.

That’s where multiple income streams start. Get started. De-risk your life. Stop trading time for money.

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