Demystifying The 7 Streams of Income Theory to Become a Millionaire

Demystifying The 7 Streams of Income Theory to Become a Millionaire

June 04, 2019

We have all heard the saying, it takes seven streams of income to become a millionaire. What exactly does this mean and how do you really define streams of income?  Does a person have to go out and get seven different jobs to create seven streams of income? I hope not, but before we look at the income sources, let's define what exactly constitutes income.

There are two types of income- active and passive income. 

Active income is generated when you perform a job and is paid for the work.  Whether you have an hourly or salary wage, if you are actively involved in generating the income for your work, then you are creating active income.  This is the case whether you work in a fast food restaurant or a CEO of a corporation.  You generate active income.

Passive income, in my opinion, is income generated in your sleep. You put in the work on the front end and cash for your efforts are generated on the back end.  If you work and decide to purchase real estate as a rental property, your active income is used to purchase the property and fix it up and the rents you collect on the property are passive income.  You don't have to do anything to collect the rent.  Other examples of passive income are dividend and interest payments and capital gains. In most cases, people work and take their active income and invest it to generate dividends, interest and capital gains. 

So, do you really need seven streams of income to become a millionaire?  No, you do not. There are countless stories of the everyday millionaire who simply worked and contributed the maximum allowed to their retirement accounts and became a millionaire.  If you would like to create other streams of income, it's pretty easy to do.  We no longer work in a society where it is frowned upon to have multiple jobs and side hustles. Although I'm not promoting the advertising from this article, the blogger does a great job listing ways he has generated both active and passive income streams. 

What can you do with the active money you generate to get closer to millionaire status? I suggest reducing your expenses be the first step of your plan!

About Terrell Dinkins, MBA, ChFC®, CDFA®

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Terrell Dinkins, MBA, ChFC®, CDFA® is an investment adviser representative of and offers investment advisory services through OBN Wealth Advisors, LLC, a registered investment adviser offering advisory services in the State of Georgia and other jurisdictions where registered or exempted. Main Office: 950 Eagles Landing Pkwy, Suite 216, Stockbridge, GA 30281. Tel: 404-723-9780. Website: OBN Wealth Advisors. Image courtesy of Gerd Altman from Pixabay.