Tired of scrimping and saving every last penny? Of course, it's helpful to live below your means and maintain a budget if you want to reach financial success — but there's only so much you can save every month.
Have you hit the limits of your frugality? Do you feel like you just can't put aside any more money from your paycheck? Instead of asking how to save more, it could be time to start asking how to make extra money — and a side job could be the answer.
Side Job = Extra Money
The answer to how to make extra money doesn't have to be complicated. You might not have to change careers, go back to school or make any drastic moves (although these are potential avenues you could explore if you wanted to boost your salary). Instead, start small with a side job — which is anything you do to earn money outside of your full-time job.
Pick up part-time work, do odd jobs around your neighborhood or community, monetize an existing hobby or seek out freelance or consulting work. It doesn't matter what you do — it's about how you use your free time to earn more money.
And if you think you don't have free time to devote to earning extra income, consider this: The New York Times reported the average American watches five hours and four minutes of TV every day. TechCrunch says consumers are spending the same amount of time on their smartphones.
It's not always about making more time in your schedule. Often, it's about trying to prioritize how you spend the leisure time you already have.
Find Your Side Job
Interested in devoting a few hours a day or week to making a little extra money? Often, the best opportunities are those you create for yourself. When thinking about the right side job for you, ask the following questions:
- Is this task or job something I can do well?
- Is this task or job something I will enjoy doing?
- Is this task or job something people will pay me to do?
It's crucial to find something you enjoy since you will be doing it in addition to your full-time job. The best side jobs are those you would do even if no one paid you to do them. (But remember, the point here is to do something you can monetize, which means other people need to value it and pay you to do it for them.)
Choosing something you're already good at will make you more efficient and help ensure you perform well and deliver high-quality work. This is also important when it comes to convincing others to pay you for what you're doing.
Brainstorm a list of things you're good at doing and enjoy spending time on. From there, narrow down the list down to what people will likely pay you to do. If you have more than one thing left on your list at this point, consider what you're best at.
Then, jump in! Tell your friends, family and others in your network that you're looking to take on some extra work on the side. Share what you do and who you do it for, and ask for referrals or recommendations on where you may be able to start.
Make Your Money Work for You
Once you start earning extra cash, try to avoid the temptation to spend it! Here are a few ways to put that money to work for you — since you already worked hard to earn it in your spare time:
- Establish an emergency fund: Think about opening a high-yield savings account and putting your extra cash here to serve as your rainy day fund. One common strategy is to accrue three to six months' worth of your regular income as emergency savings.
- Think about a SEP IRA: Your side job earnings are likely considered 1099-MISC income — unless you have an official employer for this work. If you earn self-employment income, even if it's just part-time, you could open and fund a simplified employee pension (SEP) IRA. This could help you get to your retirement goals or dreams of financial independence that much faster.
- Mitigate your risks: In addition to funding emergency savings and retirement accounts, you could consider purchasing insurance policies you might have neglected in the past. Things like life insurance or critical illness insurance could help protect you and your family against the unexpected.
- Invest in other areas of your life: Whether you open a taxable brokerage account to add to your financial cushion or use your side job earnings to invest in something like continuing education or personal development, think about how you might be able to translate that money into an investment in all areas of your life.
There's no one right answer to the question of allocating the money you earn from your side job. Your best option will depend on your needs, goals and unique financial situation. But the goals are an excellent place to start: Think about what you want to achieve, and then consider using the extra money you make to help you accomplish your goals just a little bit faster.
Sometimes saving isn't enough to reach your financial goals. A side job could help you make your financial dreams a reality sooner — and give you the opportunity to try your hand at something new.