The Average Millionaire Has 7 Streams Of Income, According To The IRS – Can You Guess What They Are?
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If someone told you that millionaires have seven different income streams, your first thought might be: Seven? I’m struggling to keep up with one paycheck and these people are out here collecting seven like Pokémon cards? But according to the IRS, that’s exactly what the average millionaire does.
The logic is straightforward. Relying on one income stream is like balancing on a tightrope with no safety net – one wobble or layoff and you’re in trouble. But with multiple streams of income, you’ve got a financial safety net that turns moneymaking into a game of “the more, the merrier.”
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So, what are these magical income streams and how do millionaires make them work? Let’s break them down – and spoiler alert, they’re not as unattainable as you might think.
The 7 Streams of Income Millionaires Use
Here’s what the IRS data reveals about where millionaires get their cash flow:
1. Earned Income: Yep, that’s your good old paycheck. This is the starting point for most people, but millionaires don’t stop here.
2. Dividend Income: Money from stocks that pay you for owning them. It’s like being on a company’s VIP list, except the perks are cold, hard cash.
3. Rental Income: Owning property others pay to live or work in. Think of it as becoming the landlord of your financial dreams.
4. Business Profits: Running or investing in income-generating businesses. It could be anything from a tech startup to a local coffee shop.
5. Royalty Income: Money from intellectual property – books, music, inventions, you name it. Write a hit song and you could get paid forever.
6. Capital Gains: Selling assets like stocks or real estate for more than you paid. It’s not predictable but can be a game-changer.
7. Interest Income: Earnings from money lending through savings accounts, bonds or other vehicles.
Rental Income As A Power Move
Rental income isn’t just another paycheck – it’s freedom. Once you have enough rental income, you can step back from your job (if you want) and have time to build those other streams. TIME becomes your most valuable asset.
By prioritizing rental income, you’re creating a foundation that allows every other income stream to grow. It’s like planting the first seed in a financial forest that eventually grows itself.
It’s important to note that real estate isn’t a magical, risk-free ticket to wealth. The term “passive income” can be misleading because owning rental properties still requires time, effort and management – dealing with tenants, handling repairs or keeping up with unexpected expenses. As Dave Ramsey often points out, passive doesn’t mean effortless.
That said, real estate offers a solid, historically reliable path to building wealth but comes with risks. Tenants might stop paying, properties may need expensive repairs and home values can fluctuate depending on the market. However, data shows that real estate tends to hold or increase its value over time. According to historical statistics home prices in the U.S. have appreciated by an average of about 3-5% annually over the long term, even when accounting for periods of decline like the 2008 housing crash.
You don’t need to wake up tomorrow with seven income streams – this is a marathon, not a sprint. Here’s how to get started:
1. Start Small: Focus on one or two streams that are appropriate for your skills and resources.
2. Reinvest Wisely: Use income from one stream to build another. For example, rent income can be put toward stocks or business ventures.
3. Educate Yourself: Learn about investments, real estate and other opportunities. Knowledge is your best asset.
4. Be Patient: Building wealth takes time, so stay consistent and don’t give up.
The goal isn’t necessarily to hit a magical seven-income stream but to diversify enough to never rely on just one source. Whether starting with a side hustle or diving into real estate, every step toward multiple income streams puts you closer to financial freedom.
Because really, who wouldn’t want to wake up one day and think, Wow, my money is making money – this is the life.
