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Multiple Income Streams Is The New Emergency Fund

Author: Melissa Cohen
Date: 2017-03-29
Most of us have too much month at the end of our money to even think about saving for an emergency fund. But what if we had more money?
Emergency funds have long been viewed as the entry point to insuring your personal finance against unforeseen setbacks. But South Africans have (generally) a buy-now-pay-later culture with a low tolerance for delayed gratification. Are multiple income streams then the answer?

In Case Of Emergency

The general rule of thumb is to have three to nine months’ worth of income set aside in an easily accessible savings vehicle – like a unit trust. This should be stocked up before any other savings plans commences. This is meant to tide you over or supplement your income in the event of a personal financial setback.

Qualifying financial dilemmas include:

  • the loss of a job
  • a debilitating illness
  • a major expense
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The lack of an inherent savings culture in South Africa, coupled with aggressive marketing tactics from credit providers, make emergency funds slightly out of reach for most. Some people are of the mindset that insuring against worst-case scenarios is a waste of money, until the worst case scenario materialises. Then the financial damage happens – high-interest loans, maxing the credit card or overdraft facility, or worse: borrowing from friends or family members. Soon you’re in a downward debt spiral that takes you even further away from the possibility of an emergency fund. But, with the current retrenchment statistics especially, an emergency fund is now more than an imperative (at the least, retrenchment cover). Solidarity, a trade union that aims to create job security for its members, published stats on retrenchment in 2015 and 2016 across multiple industries, including the communications and professional industries. There were 88 formal retrenchment processes covering a total of 58 549 job losses that they were privy to. A “drop in the ocean” compared to the number of jobs lost to natural attrition processes in the workplace preceding formal retrenchments.
Solidarity commented: “the current pattern and wave of retrenchments are very similar to [the] situation at the end of 2008 and the beginning of 2009 which was the precursor to the recession.”

Diversifying Your Salary

We all know the principle of diversifying your investment portfolio is to mitigate risk, right? Well, the same principle can be applied to your income earning ability. All your eggs do not need to be in one basket, i.e. your permanent job. With the current political instability and economic uncertainty, the term, ‘job security’, has become a bit of an oxymoron. But don’t let that scare you, we’re not saying the world is about to run out of money. There’s always money to be spent where there’s value to be had. What we are saying is, don’t make the mistake of putting the responsibility of your and your dependent’s well-being on the shoulders of your company, alone.

How To Build Multiple Income Streams

As Warren Buffet said: “Never depend on a single income.” And rightly so. Setting up multiple income streams is not a new concept. If you’re in the process of saving for retirement, you’re building another income stream for later on. Passive income, which is the best kind. But there are ways to have money coming in from more than one source, right now. All you need to do is identify what value you can offer and the amount of time you can invest. Because it is an investment. Some examples include:
  • become an uber driver
  • getting a part time job
  • sell your crafted goods or home cooked meals at a weekend market
  • learn how to trade Forex
  • buy and sell used cars
  • offer your personal organising skills as a service
  • write
  • make and sell things online
  • tutor school kids
  • babysit
  • teach a skill on an online platform that pays (passive income opportunity)
The opportunities are endless. Get ahead of the ‘general public’ by doing something today that will start you down the path to a better, and more secure, financial future.
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