by Maurie Backman | March 7, 2020
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Here's how to make the most of the money your second gig delivers.
Maybe your side hustle involves you walking dogs for three hours a week. Or maybe it means spending 15 hours at your computer creating web content for a few different clients.
No matter what type of work you do on the side, you're no doubt aware that taking on a second job is a great way to boost your earnings. In fact, according to a recent survey by The Ascent, more than 50% of working Americans have a side hustle. And of those that do, more than 75% think that extra gig is more than worth it.
If you're pushing yourself to earn money on top of your main job, you may be inclined to blow that cash on something fun -- a vacation, a sports car, or a new entertainment system at home. But before you do, here are a few responsible things you can do with your side hustle income.
We all need money in a savings account for a rainy day. If you don't have at least three months' worth of essential living expenses tucked away in the bank, then that should be your most pressing financial priority -- and you can use your side hustle earnings to tackle that objective. If you don't have an emergency fund, you'll generally have no choice but to take on to debt when unplanned bills arise or you're suddenly let go at your main job. Having three to six month's worth of living expenses put aside will give you a cushion to see you through difficult times.
The longer you carry a credit card balance, the more money you throw away on interest. If you owe money on your credit cards, it pays to apply your side hustle income to pay off that debt and eliminate it as quickly as possible.
It's not uncommon to graduate college with student loans. The problem? It often takes 10 years or longer to pay off that debt. Not only will it accumulate interest, but it will also hang over your head for much longer than you'd like. If you're able to generate income from a side hustle, you can use it to break free from that debt sooner -- and enjoy the mental benefits of not having loan payments to contend with.
If you're relatively young, retirement may not be on your radar -- but it should be. The sooner you start saving for that milestone, the more money you stand to accumulate, which you'll appreciate when you're older and no longer working. Of course, it's hard to prioritize retirement savings when you have near-term expenses to deal with. But if you're earning extra money from a side hustle, you have a solid opportunity to start contributing to a 401(k), if your employer offers one, or an IRA, which you can open through most banks or financial institutions.
Without a sizable down payment, you may not qualify to buy a home, and if you do qualify, your monthly mortgage costs may be unbearably expensive. If you're tired of renting, the money you earn from your side gig can be socked away for a down payment on the home you're hoping to buy. That way, you'll get to build equity in a place of your own rather than spend your hard-earned money paying off somebody else's mortgage every month.
Earning money from a side hustle gives you a chance to improve your financial picture. Of course, there's nothing wrong with reserving a chunk of your side earnings for fun stuff, like small trips or dinners at your favorite restaurant. But if you use the bulk of that added income for the above purposes, you'll be thankful in the long run.
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