Often, people have only one source of income. That is often an income from a job. If a person is married, the couple often has only two incomes coming in from their jobs. As an employee, an individual if taxed at the highest rate, which is commonly referred to as earned income or marginal tax rate. When an individual makes more money this way, they get taxed even more as they get put in a higher tax bracket.
A person can have multiple streams of income. These other streams of income can come things such as businesses ( 100 % owner or partial ownership), rental properties, network marketing, bond interest, interest from savings accounts, and peer to peer lending. Interest from bonds, savings accounts and peer to peer lending are taxed as earned income, there is no extra taxes like CPP and EI in Canada or like the extra taxes in the United States.
Income from businesses and investments are taxed less and some of these incomes can be done with little to no effort. There is only 24 hours a day so the amount of money a person can earn from his job depends on his wage and the amount of hours he or she works. If you own a dividend paying stock, then the company will pay you on a monthly, quarterly or semi-annual basis for being an owner in their company. This is like clockwork as along as the company continues to be profitable. The dividend can be increase, cut, and stay the same year to year.
If you own a rental property that positive cash flows after the expenses of the property are paid, that money is extra money that you have to pay your own bills or do whatever you like. There are four types of income with a rental property that show up on a financial statement. Rental Income, Depreciation, Appreciation and Amortization
The biggest benefit of multiple streams of income is that it can make your life a lot less stressful as you will still have money coming in if one of the income streams is eliminated. Currently, my main income is from a job and is supplemented by dividend income from the companies that I am a part owner of.