The NIV Bible puts Ecclesiastes 11:2 this way: “Invest in seven ventures, yes, in eight; you do not know what disaster will come upon the land.”
It’s become a proverb in the finance community that the average millionaire has seven streams of income. It was based supposedly on an IRS document. It reported on the differences between the rich and poor (6053 people) and how they file taxes. After reading it several times, it isn’t immediately obvious where the number seven actually came from.
It does, however, mention that richer people do have more sources of income. In fact, the top 10% derive a smaller percentage of their income from wages than people with less wealth. It also explains that wealthier people tend to concentrate their wealth in areas that are taxed lower than labor income. This allows their deductions to minimize the amount of realized income, or even allow them to claim a loss.
Still, it is good to have different forms of income, at least in case of hard times. Here are 7 different ways you can diversify.
Seven Ways to Invest in Seven
Taxed differently: Having a side business allows you to take tax deductions in a way that one could not as an employee. Capital gains from investments are also taxed at a lower rate than taxes from employment. Either of these options can help you earn and keep more of your money.
Based differently: Different lands, different rules. At a smaller degree, this can apply to states too. I was speaking to an accountant in Texas this week who explained the sales and use tax, and the franchise taxes that LLCs are supposed to pay in their state. Meanwhile, in Alaska, there is no state sales tax or franchise tax. And Texas is supposed to be one of the friendlier places to do business! Territories like Puerto Rico also have different tax treatment. By having a business or some investments in another state or country, you could operate in more tax friendly areas.
Currencies: I had the good fortune of vacationing in Japan during 2024 when it had a weak yen to the Korean won. Everything was cheap (except clothing, for some reason). As one country’s currency gains over the other, you can move between the two currencies. This can also include crypto-currency.
Non-correlated assets: Book royalties and music royalties, for example, are not tied to the performance of the stock market. The stock market can be doing great and book royalties are not – or vice versa. By not having all your wealth dependent upon the stock market, it brings a greater likelihood of stability in your financial life.
Physical World Ways
Tradable goods: During those rare 4th turning moments when the markets are going haywire and layoffs could happen at any time, have something your community needs. Example include food, a septic truck, or the ability to repair the internet. People will trade what you need for what you got, as long as you have what people desperately need. While you can charge a good price and profit during a crisis, do the world a favor, though, and don’t gouge your neighbors.
Things you can rent (or depreciate): Not every investment has to be publicly traded or bought at an online exchange. Sometimes business equipment, housing, vehicles, or a license to a product (movie rights, option to buy land) can bring in an income. At the same time, you can write off many assets by capitalizing them to reduce your tax burden or even claim a loss.
Different Labor: I will teach my children that they need at least two skills; a physical, and a mental. Many people are very fortunate to find one thing they can consistently do to earn a living over a decade or more. Having two things will only provide greater peace of mind and a more interesting work-life.
Schedule a Bookkeeping Call
For help with your business, to know exactly what your expenses and income situation is, and insight that can help you make sound business decisions, schedule a call with me for a FREE bookkeeping strategy session.
What about you? How do you follow the principle of investing in 7 (or 8) things?
Leave a Reply