Diversifying income sources to achieve financial freedom

Diversifying income sources is a strategic decision that adds great value to achieving financial independence and living with peace of mind

The philosopher Seneca said that "nothing gives us such respectable dignity, nor such important independence as not spending more than we earn". Almost 2000 years after the great philosopher died, the world has changed radically, and the options we have before us to spend our money are infinite and very suggestive. Therefore, complying with Seneca's maxim is becoming increasingly difficult. To achieve this, it is essential to diversify sources of income and achieve financial freedom that allows us to spend without fear of being in the red.

This issue is even more relevant today when inflation devalues the only source of income for millions of people: their salary or pension. On the positive side, the possibilities of diversifying income sources have increased exponentially. Why? The consolidation of the digital world as an increasingly important sphere of our lives, how we relate to each other, and how we do business.

Beyond options such as creating and marketing digital content, selling products or services online, and even monetizing social network profiles and websites, the best way to diversify sources of income is to invest in financial products that offer a return that helps investors achieve the long-awaited financial freedom and not spend more than they earn.

In this article, we will unpack how to diversify income sources in the long and short term and the role FinTechs like Inversa Invoice Market play in pursuing financial freedom.

Wealth vs. Freedom

Financial freedom is, first and foremost, a paradigm shift. Why? It focuses on the relationship between income and expenses and places a higher value on time than money.

People who want financial freedom do not seek to become rich, i.e., to accumulate vast amounts of money, but rather to earn enough income to make decisions freely, without worrying about expenses and living, as they say, "on a shoestring".

In its maximum terms, financial freedom would be the ability of a person to live thanks to his passive income (the money he receives for rent, the profitability he obtains thanks to investment products…) without the need to carry out a paid job.

However, financial freedom can be understood as a long road towards this ideal so that the salary of a professional or the money obtained by an entrepreneur from his activity can be complemented by diversifying the sources of income. Not depending on a single channel for receiving money gives people security and increases their freedom.

Financial freedom is becoming increasingly relevant due to the greater importance we give to our time and the preponderance of values such as security or stability.

Many people design investment strategies to diversify the sources of income available to them and gradually increase their financial freedom until they reach vital objectives such as retiring early or enjoying retirement without economic shocks. In other words, the goal of people seeking financial freedom is not to become rich but to free themselves from ties and ensure that a shortage of money does not weigh down their life plans.

Diversifying income sources in the short and long term

Where should you start when thinking about financial freedom? First of all, by optimizing your cost and expense structure. In the consumer society, the incentives to acquire goods and services are infinite. This leads us, on many occasions, to buy products or contract services that we do not need. Therefore, it is essential to analyze what and how we spend our money and improve our decision-making, discarding those goods and services that we do not need or do not bring us benefits.

Beyond this, achieving greater financial freedom involves investing to diversify income sources, both in the long and short term. What products can be invested in for a long time?

• Funds (indexed and listed).
• Pension plans.
• Stocks.
• Real estate for income.

This kind of investment can be essential to achieve financial freedom in the long term and bring passive income to people, especially in the final phase of their professional careers and in retirement.

On the other hand, people who want to increase their financial independence can also make short-term investments:

• Bank deposits.
• Short-term government bonds.
• Alternative investment vehicles such as crowdfactoring.

Short-term investments generate income in a short period, which can be used to make new investments, both short and long-term, and increase the financial independence of individuals.

Design diversified and proactive investment strategies

Beyond combining short- and long-term products, it is essential for investors to be proactive in designing and implementing their investment strategies and to diversify sources of income.

The emergence and consolidation of FinTech and alternative investment platforms have democratized access to the investment industry for everyone and facilitated proactivity and dynamism when designing investment strategies.

Now, people do not rely solely on active income linked to their work or business activity but can invest their savings in long or short-term products, such as fixed-income or equity investments. Diversifying the sources of revenue obtained through investments helps to avoid depending solely on a particular product, which would be counterproductive in the search for financial freedom and independence.

On the other hand, technological development and the emergence of web and mobile applications that allow managing investments without leaving home have been crucial for small investors to seek financial freedom from the investment arena.

On platforms such as Inversa Invoice Market, people can invest their money by accessing all the financial information of each operation, making decisions autonomously, and continuously monitoring their investments. In this way, investors no longer depend on the knowledge of professionals in the sector but can make investments constantly and autonomously. Moreover, they have both the products of traditional financial institutions (e.g., deposits or funds) and alternative investment mechanisms: crowdfactoring, crowdlending, and crowdequity…

Financial freedom does not fall from the sky; to achieve it, you have to diversify your sources of income and be proactive and constant.

Inversa, an ally in the quest for financial freedom

Inversa Invoice Market is a retail investment platform that can help people diversify the sources of income available to them and achieve greater financial freedom. Why?

1. Easy to understand products. What investment products can individuals purchase on Inversa? Invoices from companies in the real economy. Companies upload to the platform invoices from their clients that they have not yet been able to collect. Dozens of people invest in them in exchange for a return; thus, the companies have access to the liquidity they need. Once the invoice is due, the customer pays it, and the investors get their money back.
2. Easy-to-use platform. Inversa's marketplace is characterized not only by its investment product but also by its usability. Each transaction's financial information is explained clearly and simply (profitability, term, debtor's credit rating, repayment analysis of the transferor and the debtor…). In addition, the way to register and operate in it is very agile and intuitive.
3. Decide in which companies to invest and diversify investments. People who have opted to diversify their income sources can decide which companies to invest in Inversa with full autonomy and freedom. In addition to all the information the platform provides, thanks to Big Data and Machine Learning, investors can track each business online to know precisely who they invest.
4. Control investments in the short term and make investing a habit. Inversa facilitates active and continuous investment management to achieve diversified income streams and increase people's financial freedom.
5. Advance returns averaging around 8%. The most potent reason that Inversa is an excellent ally in diversifying income sources is that it offers returns that, on average, stood at 7.9% in 2022, well above the interest shown by other short-term products such as public debt or bank deposits.

Automating investments to avoid having to spend time earning income

We said at the beginning of this article that one of the reasons why people seek financial freedom is because they want to enjoy one of the most valuable assets of human beings: time.

We live in a fast-paced world in which time slips through our fingers, and we often feel that we do not have all the hours we need to enjoy our families, undertake, launch personal, professional, or business initiatives, and, above all, enjoy what makes us happy.

For this reason, one of the critical functionalities of Inversa Invoice Market is extremely interesting: the investment automation tool.

Thanks to this functionality, an investor can set the parameters of the investments he wants to make and decide in advance. For example, a person can establish that he only wants to invest in invoices with more than 6% interest, a maturity of less than 90 days, a low or medium-low risk level, and a maximum of 500 euros per invoice.

The system analyzes all this information the user establishes and only makes investments that fit these parameters. In this way, the investor retains all the decision-making power but does not have to be permanently aware of the marketplace. This saves time and prevents savers from missing out on investments that fit their strategies.

In short, financial freedom is an increasingly relevant concept, a way of seeking economic independence and building a future without economic uncertainties. For this reason, many people are committed to diversifying the sources of income available to them, which undoubtedly involves making investments.