In this week’s episode of the Financial Conversation podcast, we discussed some of our craziest side hustle stories and how to use side hustle income.
Kayla told us about her side hustle raising cattle and sheep as a 4H project to help put herself through college and lessen her student loan debt.
Kate, from Cashville Skyline, joined us as a guest on the show and shared about her experiences with side hustles, including the time she worked as a beer girl during professional sporting events. Good times!
We also touched on whether or not side hustles are a sustainable way to continue making an income over the long-term.
Overall, we decided that while side hustle income is great to help you get ahead with your financial goals in the short-term, it’s not usually a good long-term strategy as you might get burnt out from working too much.
This is why it’s imperative that you find out how to use your side hustle income to your advantage. Here are a few productive ways to use your side hustle income to your advantage.
Pay Off Your Debt
If you can’t stand debt, you may be on a journey to pay it off. To pay off your debt aggressively, you must put extra money toward the balance. This can help shorten your repayment term and reduce the amount of interest you have to pay on your debt. Getting rid of a debt burden sounds nice, but finding the extra money to do so often requires an increase in income like a side hustle.
Earning extra income is a great way to pay off your debt sooner without causing much of a financial strain. For example, if you earn $3,000 per month after taxes and your monthly expenses including your minimum debt payments add up to $2,800, you won’t have much leftover to make extra debt payments with at the end of the month; especially if have an additional unexpected expenses. However, if you have a side hustle that brings in about $500 per month after you account for taxes, you’ll have around $700 to put toward debt instead allowing you to pay around $6,000 more on your debt annually.
To prioritize your debt and increase payments, when you earn side hustle income pay yourself first after you set aside 25-30% for taxes if taxes aren’t already deducted from your income. Putting larger amounts of money toward your debt will help increase your motivation to become debt free after you see the balance steadily decreasing each month.
Build Up Your Savings Accounts
Notice I said ‘accounts’ as in multiple savings accounts. Aside from the typical emergency fund, most people are saving for multiple financial goals whether it’s a big ticket item that they don’t want to finance, travel, or a college fund. The extra money you bring in can help you boost your emergency savings along with your other savings goals.
If you have multiple savings accounts, rank them by importance and divide up your side hustle income so you can contribute preparing financially for all your upcoming goals.
Similar to saving, investing allows you to set a portion of your income aside for future use. Investing is one of the best ways to prepare for your financial future and generate a nice return of passive income when you decide to retire.
If you’re not maxing out your retirement yet, your side hustle income can help you reach that point. Plus, your future self will thank you when you’ve set aside enough money to compound over the years in order to meet your needs when you decide to slow down or stop working.
If current employer doesn’t offer a 401(k) see if you can open a Roth IRA instead and contribute up to $5,500 annually if you are under the age of 50 and $6,500 annually if you are over 50 as long as you meet other eligibility requirements.
Supplement Your Income
This is the most common use of a side hustle. If you’re already doing all of the things that were mentioned above or your budget is very tight compared to your income, you can certainly use your side hustle income to help make ends meet. This is an approach a few of us mentioned using in this week’s episode about side hustles.
If you are in a temporary situation and know that earning more money on the side of your main job can help you meet a short term goal and get ahead financially, start using the extra money you earn to pay a bill, help cover child care expenses, fund an ongoing renovation project for your home, or meet any of your other needs.
In all seriousness, after all of our side hustle dealings with cattle, babysitting, pouring alcohol, and working at events, we’ve realized that earning extra money can help you meet your financial goals and monthly expenses easier while releasing some of the pressure a lot of Americans feel each day when trying to provide and make ends meet on a single income.
The key to diversifying your income through a side hustle is using it to your advantage to get ahead.