Even a moderately-inept investor could tell you that diversification is important. They won’t tell you, however, that it’s just as important to diversify where you GET your money, as it is to diversify where you PUT your money.

The concept of diversification is simple. By spreading your money around, the chances that any one event could totally take you out of the game are reduced. You can learn more about the diversification as a risk-reduction strategy with Investopedia’s article on Diversification. The old standby, Wikipedia, also has a much friendlier article on diversification.

We’re told not to “put all our eggs in one basket,” but that’s what we do everyday. Where does your money come from? If you’re like most people, you get up and work for someone else everyday. In exchange for your time and your energy, you have a stream of money gushing (or trickling) toward you in the form of a paycheck. If someone turns off the flow, you could be SOL and unable to make your rent payments. It’s rarely your hand on the spigot, either.

Let’s apply the concept of diversification to income now. Let’s say that in addition to your job, you find a few other ways to make some extra money. Maybe you’re turning in scrap metal, maybe you’re running a website about Furbys. Maybe you’re spending your weekends on eBay. Your income is spread around a bit more. One person can’t come along and kick you off the gravy train. If you lose your job, you might lose 50% of your monthly income. That still hurts, but it hurts a lot less than losing 100% of your monthly income.

The same idea applies to the any source of income though. If you run out of stuff to sell on eBay, the lights won’t go out–you just might eat out a little less. If interest in Furbys drops (I can’t imagine how that could happen) you’re not left out in the cold either.

The bottom line is that if you make all your money from a day job, someone else controls your livelihood. You’re betting everything that you won’t lose that job, essentially. What could be riskier than that? Take charge and build your own safety net. Who knows, side money can become big money.