Deconstructing how to become a millionaire is no simple feat. However, progress has been made in understanding the income streams of people that have achieved a million in net worth. In fact, millionaires are more common than you think, and this makes understanding the commonalities between them a little easier than you would expect.

By drawing on these common threads between millionaires, it always gives us some degree of hope that we too can achieve wealth on this scale. Logically speaking, it’s actually much more achievable than you might think.

Personally, I always thought those that achieved millionaire status must have a high revenue business and be a highly successful entrepreneur. That or they have won a competition such as who wants to be a millionaire.

In reality, there are actually some actionable steps you can take to build up your income streams to accomplish wealth on this scale.

How Many Income Streams Do You Have?

In fact, there are just 7 common income streams that millionaires regularly build and what I find most interesting is that this research by the IRS shows that millionaires often hold multiple income streams:

• 65% of self-made millionaires had three streams of income.
• 45% of self-made millionaires had four streams of income.
• 29% of self-made millionaires had five or more streams of income

This kind of dispels my own myth that you have to have an amazing business venture and 10x all other competition to be a millionaire. Essentially if you want to make a million, the trick is to actually diversify your income streams.

How To Become A Millionaire With 7 Types Of Income Streams

1. Investment income — Dividend income from stocks owned.
2. Earned income — Paycheck income from contracted employment.
3. Rental income — Rents from real estate they own.
4. Royalty income — Payments for royalties from selling rights to use something they’ve written or invented.
5. Capital gains from selling appreciated assets.
6. Profits — Income after expenses from businesses they own.
7. Interest income — Money from savings, CDs, bonds, or other lending activities.

My Income Streams

At the moment, I am using my earned income to build up my investment income, the plan for 2021 and beyond is to invest £800 a month into the stock market.

I will focus more on this goal once I have topped by help to buy ISA from £8,700 to at least £10,000. As this would gain be a £2,500 (25%) bonus from the government to buy a house.

My investment income will probably account for the largest proportion of my income and eventually out-strip my earned income. My goal is to have a portfolio value of around £450,000 which would generate a post-tax annual income of around £18,000.

I hope to achieve this in the next 15 years, by the time I am 45 but as you can see if I kept going I would be become a millionaire by 55. This assumes a 10% average return but even with a rate of 7%, it would return a portfolio value of £787,371.

If you would like to calculate how much you need to invest each month to reach financial freedom then use my financial independence calculator.

I also want to continue to build up my blog income either through increased add conversion, affiliate products or my own products e.g. courses. I would also like to publish a book this year.

This would then give me 3 or 4 types of income and hopefully get me on my way to becoming a millionaire if that’s what I wanted.

1. Investment income

To keep this simple, one of the most common approaches to investing is to buy stocks which then return a dividend. However, there are many forms of investing and a multitude of investment vehicles.

If you have visited my blog before then you will know that this is one of my preferred sources of (future) passive income.

My main strategy for financial independence has been to invest in the stock market into index funds. It’s one of the ways I’ve tripled my income over the last few years and plan to be financially free by 2035.

2. Earned income

This includes a paycheck income from contracted employment or self-employment. This is an active source of income.

It’s a common myth that successful millionaires all research this status by working for themselves. In reality, many millionaires do work for other people and even if they do run their own business they may still be accountable to customers, or stakeholders so they are still technically working for someone.

I imagine this is why many millionaires diversify their income into more passive or semi-passive income streams like the stock market or rental income.

3. Rental income

This income stream comes from properties that the person in question leases out a property they own for consistent rent payment or even in infrequent one (e.g. Airbnb).

An alternative to owning and managing a property themselves may be to invest in REITS, which is an investment in the property sector.

4. Royalty income

Millionaires may also maintain or grow their wealth by collecting payments for royalties from selling rights to use something they’ve written or invented.

As a result of options such as create space publishing, your own book is more accessible than before. This has led to a rise in the popularity of self-publishing rather than getting a book deal from a publishing house. Which makes it a great option for developing future passive income.

Episode 381 of the smart passive income podcast is a great place to start if you want to learn more about this: Self-Publishing versus Traditional Publishing

Other interesting Podcasts on this topic on SPI are:

• SPI 382: The Surprising Truth about How One (Self-Published) Author Sold Millions of Books
• SPI 413: The Secrets of Publishing for Profit (Both Fiction and Non-Fiction), with Mark Dawson

5. Capital gains

This is the concept of gaining a profit following the buying and selling of an asset which has increased in value over the holding period.

This may include the holding of tangible assets such as Birkin Bags which grew by 13% in 2019 for example. These bags can range in price between $40,000 and $500,0000

Other tangible assets include classic cars or a business (which itself owns tangible assets). Capital gains can also be made on commodities (e.g. gold) or shares.

6. Profits

This is the type of income most commonly associated with millionaires. This is the income generated after costs are deducted from the revenues of the business or businesses that they own.

7. Interest income

This is money from savings, CDs, bonds, or other lending activities. I imagine these are low risk but relatively low yield activities that would form a smaller part of a millionaires income steam.

How To Become A Millionaire: 3 Things You Can Do Today

I have never seriously thought or desired to be a millionaire. Probably because I thought it was never achievable for someone like myself, who has historically never been any kind of entrepreneur.

However, in light of findings such as millionaires hold jobs, or require several different forms of income to hold their status it does make it that slightly more accomplishable.

Whilst the information in this article doesn’t signpost the steps required to be successful in any of the 7 income streams. It does however highlight that by taking actionable steps to generate different types of income, this can seriously increase your probability of becoming a millionaire.

1. Learn More About Investing

As I have mentioned earlier in this article, the discipline I focused on understanding most is in investing in the stock market. However, it is unfortunate that many people lose money in the stock market because of speculative investments by investing in individual companies.

Making money in the stock market is one of the most accomplishable ways to generate a second type of income for the every-day person such as you or I. With this method alone you can become a millionaire if you invest enough over time.

In my opinion, this is one of the simplest and most passive forms of additional income generation. Once you get set up the less you do the better for your investment portfolio.

However, this is only if you research and invest responsibly. With this in mind, I would direct you to my own stock series and my list of 8 index funds to get started.

Whilst you are here, you should also take a moment to use my financial freedom calculator to generate how much you need to invest to reach financial independence.

2. Start Generating A Profit From A Side Hustle

The second thing you can do today is to start a small venture which can start to generate a second type of income. You can have your very own blog today in less than 20 minutes and with very little knowledge.

My little blog has now started to generate a revenue stream of around $25 to $30 per month which I am hoping to 10x this year. This is an incredibly far-fetch seeming goal for me, however I never actually thought I would earn any more than a few dollars per year on this venture, it was intended to be a hobby blog.

You can read more about how to create and monetize a blog by reading the following articles on my site:

• How To Start A Blog In Under 20 Minutes: You Could Have Your Own Blog Today
• How I Made My First $100 Blogging: You Can Make Money As A Beginner Too

Personally I have found blogging the best method for developing a sense of entrepreneurialism and an understanding how to create an income outside of my primary income.

It’s a great low-risk method for earning extra money and there is very little start up or ongoing costs. Therefore making a profit takes very little revenue. By contrast, where as your costs remain low, your revenue is easily scalable with greater traffic.

3. Discover New Ways To Make A Profit

From trying to build my blog I have discovered others who have turned their side hustles blogs into high earning products e.g. courses and royalties. With the income generated far surpassing anything they could earn in their regular 9-5s:

• Making Sense Of Cents
• Her First 100K
• Four Pillar Finance
• Smart Passive Income

Therefore why not jump straight to writing your very own book, fact or fiction or designing your own course or product to sell on places such as Etsy, Amazon or Ebay. There are thousands of ways to make money online by solving peoples problems.

As a result you can look around at online entrepreneurs like this as a frame-work for replicating their success. For example, starting to learn more about SEO or working on starting to serve a niche through methods such as coaching and seminars.

Depending on your personality there may be a different method for you. For example if you’re an introvert you may prefer the former. If you love speaking to people then a more verbal form of communication may be the thing that kicks off your new source of income.