Jan 092012
Earning side income is often touted as a good way to subsidize one’s full time job. The more work you have the more money you make. But there is a hidden benefit to it that is often overlooked called the compound income phenomenon, which works like compound interest. The more income streams you have, and the longer you keep them for, the faster your total income will grow. Below is a graph of my after-tax, monthly earnings from various income sources in the past 3 years (relative).
Full Time: Graphic Design related work
Part Time: Design related teaching job (hover mouse over the graph to see notes)
Dividends: Stock dividends from investment portfolio
Tutoring:  Private tutor lessons

      Over time, instead of a constant growth rate, there seems to be a shift towards geometric growth. This all happened one step at a time, but it also occurred very naturally. Even though I’m working more now (about 50 hrs a week total), on an hourly bases, my income is still growing so that shows progress. The reason multiple incomes can accelerate each other’s earnings is because the difference sources all work together to create mutual support, and maximize each other’s earnings power, as well as unlock any hidden potential faster. 

      For example, to sharpen my skills at my full-time job and grow my salary, I can use my part-time job to practice those skills. My part-time income will grow too because my full-time job gives me constant and relevant experience in the field so I can bring new skills to the table, which gives me an advantage over other teachers who may not have that extra industry exposure. My part-time job also gave me the experience to try private tutoring, and through my full-time job I made contacts and found my first student that way. As these earnings grow and I have more savings each month, it’s only natural that my rate of investing grows as well, which translates into more dividend income, which I can re-invest into tutoring supplies or back into dividend stocks. Each income stream builds on top of another. This synergy and compounding effect allow me to bring in revenue much easier and faster than a single job ever could, even with over time.
      I wouldn’t be as profitable at my part-time job without the experience of my full-time employment. I would have to drop my hourly tutoring fee if I didn’t have current teaching or industry credentials. My dividend income wouldn’t increase as this rate if I didn’t have my other jobs and any savings. Separated, income sources are mundane and predictable. They can’t grow nearly as quickly. A job is a job. Work is work. But combine a few of them together, they can leverage off each other’s strengths, and you will have yourself a recipe for success!
      If you currently work part-time or even full-time, take a minute to consider picking up another income stream. Over time you too can experience the power of compound income.  In another post I’ll explain how pretty much anyone can make some side income by tutoring. In a nutshell: Decide what you’re good at and post an ad online selling your knowledge.

[edit on August 1st, 2013] I have just completed a follow up to this post. I have procured another source of income and updated the chart 🙂  [/edit ]