Workable Wealth Blog | Financial Education and Resources
You are in control of your financial education. Let us ditch the fancy lingo and start learning about money in a way that is fun and relatable. Fee-only financial planner based in San Diego working locally and virtually across the country helping young families, professional and entrepreneurial women, and military families.
About 13% of plan participants max out their 401(k) each year. If you’re one of the 13% – congrats! Maxing out your 401(k) is an amazing accomplishment, and it can help to put you on the path to living the retirement you’ve always imagined.
However, maxing out your 401(k) doesn’t mean you’re done saving! Depending on your retirement goals, you may need to go above and beyond maxing out this account. There are so many different ways for you to save for your future goals (while in some cases also continuing to save money on your taxes). If you have the extra cash flow to maximize some of these strategies, it’s wise to take advantage of them!
What Does Maxing Out Your 401(k) Look Like?
In 2019, the deferral limit to your 401(k) is $19,000. If you’re age 50+, you can add an extra $6,000 in “catch up” contributions. This limit only applies to your money. Any matching contributions made by your employer are icing on the cake.
Remember to check your employer’s policy. In some cases they may stop matching contributions if you hit your $19,000 contribution limit part-way through the year. There’s no reason to leave free money on the table, so make sure that you plan to contribute up to your maximum limit over the course of the full year to keep receiving your employer’s matching contribution.
Backdoor Roth IRA
A backdoor Roth IRA isn’t as complicated as it sounds. To fund a “backdoor” Roth IRA, you start by funding a Traditional IRA. Then, once a year (or every few years) you do a one-time conversion of your contributions from the past year to a Roth IRA.
Let’s look at an example:
You have $6,000 you’d like to contribute to retirement savings, but you don’t meet the income restrictions to open and fund a Roth IRA. So, you open a Traditional IRA, and contribute the $6,000 as a non-deductible contribution. Once the money hits the IRA account, you can convert the $6,000 into a Roth IRA (thus working around the income restrictions) at a future point.
When does a Roth conversion make sense?
Roth conversions are a fantastic way to boost your retirement savings and save money on taxes during retirement. You can stagger when you do a Roth conversion depending on what tax bracket you’re in that year, or whether you have the extra cash flow to pay the income taxes on the amount you’re converting to a Roth IRA.
It’s also worth noting that a Roth IRA can be used for more than just retirement income. After the funds have been in the account for five years or more, you can withdraw them without penalty for specific expenses, like a first home purchase, or education expenses. This gives you the opportunity to go through the Roth conversion process with the intention of saving for retirement, but also allows you to have some flexibility with how you spend that money down the road.
Contribute to a 529 Plan
When you know that you’re on track to achieve your retirement savings goals, you can shift your focus to other financial milestones you’re working toward. For a lot of young parents, being able to help their kids pay for college is a big priority.
Contributing to a 529 Plan for your kids helps to set them up for future success, and encourages generational wealth. 529 Plan contributions also grow tax-free – which means you’re able to save now without paying exorbitant taxes later when you withdraw the funds for qualified educational purposes. You can use the tools and calculators here to crunch numbers on what to set aside for future college expenses.
If you still have additional cash flow and want to take advantage of the growth that come with investing, you could consider opening a standard investing account. Although contributions to these accounts aren’t pre-tax, they’re still a good way to grow your savings and diversify your portfolio.
Investing accounts don’t have to be retirement-specific. A traditional investment account allows you the flexibility to access your money before retirement, while still incorporating a wide range of investment options into your strategy.
When clients have maxed out their employer-sponsored retirement plans, we typically begin to weigh options of contributing to after-tax investment accounts versus doing non-deductible IRA contributions. Investing in an after-tax account gives you the flexibility to access the funds at an earlier age (pre 59 ½) than if you have the age-restrictions around retirement accounts.
Fund Your HSA
Your HSA (Health Savings Account) is an excellent way to continue saving for medical expenses in retirement without sacrificing the flexibility to use the funds now. Contributions to an HSA are all pre-tax, which helps to lower your taxable income. When you use your HSA on a qualifying medical expense, you aren’t taxed on any capital gains the funds have earned in your account over the years.
But how can you use your HSA for retirement expenses?
The funds in your HSA rollover year to year. There’s no urgency to spend them now, and you don’t have a deadline to use them by. Even if you’ve started your HSA through your employer, you are the sole owner.
So, if you should change jobs, you get to take your HSA with you. However, if you do run into a medical emergency now, you can still use the funds in your HSA to cover the expenses. The flexibility your HSA gives you is reason enough to consider funding one for you and your family, and the fact that you can continue to use the funds for growing medical expenses in retirement is an added bonus!
Does your company allow you to buy into stock options or RSUs? If you’ve already maximized your other retirement savings options, you might look into leveraging the stock options your company offers to their employees. These stock options can help you to boost your income using long-term capital gains strategies. Because many stock options are discounted for employees, you may even be able to use them as a way to get more exposure to the stock market for relatively low upfront cost.
Before diving head first into stock options or RSUs (restricted stock units – another form of employee stock option or compensation), make sure that you understand exactly when they’ll vest, when you can exercise them, and what you can expect from a tax perspective. Stock options can be a really good way to grow your wealth quickly, but the taxes you owe on them, and the upfront cost need to be planned for. This is especially true if your employer hasn’t discounted the options enough to make them a good deal for you and your family’s unique financial situation.
Build a Plan That Meets Your Goals
It’s easy to get stuck in the constant cycle of focusing only on retirement saving. After all, most of the financial planning articles out there push two main savings “goals” that everyone should be working toward:
1. Emergencies. 2. Retirement.
Beyond that, there’s not a ton of information out there on what to do after you check both of those boxes.
Saving for retirement is fantastic, and it’s a goal that a lot of people should be taking more seriously. But if you’re on track to have more than enough saved for retirement, it’s worth figuring out how saving can positively impact your life right now.
When you build a savings plan, don’t just save for the sake of saving. Squirreling money away without goals can be a recipe for burn out. You wind up not achieving your short-term goals, or living the life you want to live, because you’re so focused on the future.
As you build savings goals beyond maxing out your 401(k), it can be helpful to work backward. Start by outlining what you want to achieve through savings, then start outlining the steps you’ll take to reach those goals. Your goals might be long-term: like saving for your child’s education expenses, or buying a rental property. They might also be short-term: like purchasing your first family home in the next few years, or saving so that you can buy a new-to-you vehicle using cash.
Maxing out your 401(k) is really only the kick-off point. You’re entering a world of exciting saving options that are going to benefit you for the rest of your life!
Want help? Schedule a call today – I’d love to talk to you about how to organize a savings plan that sets you up for success right now and in the future.
Many entrepreneurs and hard-working career professionals have big money goals for themselves. The idea of becoming a millionaire is appealing – but the steps you need to take to get there can be less than clear.
Some people might assume that becoming a millionaire isn’t possible without a hefty inheritance or a 6-figure salary. The truth is, with time and a strategy, anyone can increase their wealth to millionaire status.
Set Smart (and Specific) Goals
Setting money goals is a big part of growing your wealth, but it’s not good enough to set a general goal and hope that you achieve it in the long-run. For example, if your goal is to be a millionaire, you’re thinking too broadly about your money. Setting more specific goals that break “millionaire status” into smaller, actionable steps are key. These might be:
These goals are specific, and still put you on the path to reach your bigger goal – becoming a millionaire. It can also be helpful to set goals that are rooted in “why.”
What does becoming a millionaire mean to you?
Having a million dollars in the bank provides an appealing level of financial freedom and security, but I’m willing to bet you have other reasons for wanting to grow your wealth. Maybe you want to provide a college education to your kids. Maybe you want to quit your job and start a business or retire early to travel the world. To stay on track, set financial goals that are rooted in these motivational “why’s”.
Increase Your Human Capital
The best way to increase your salary and cash flow is to grow your human capital. Wondering what that means? Take a look at the business owners, CEOs, and other professionals you admire. What do they all have in common? Each of them is taking the time to grow and improve. This might mean that you continue your education. It may mean that you ask for more responsibilities in your current job or role so that you can learn and grow. Setting personal and professional growth goals for yourself increases your value in the workplace and beyond – which can help you to achieve your dream of being a millionaire someday!
Avoid Lifestyle Inflation
Millionaires often don’t live like millionaires. Even as you see your wealth grow, that doesn’t mean you have to start living like Elon Musk. Lifestyle inflation strikes when people start to make more money than they have in the past, and they want to live in a way that “proves” they have the money to spend. While it can be rewarding to spend your hard-earned wealth in a way that brings you joy and fulfillment, it’s still important to keep yourself in check. Buying the biggest house in an expensive neighborhood just because you can may not be the best idea.
In fact, if you’re working to become a millionaire, you should probably work to keep your expenses low and create a budget that fulfills you emotionally to avoid overspending in other areas of your life. Avoiding lifestyle inflation means you have to prioritize your expenses. For example, you may want to opt in for a more-expensive gym membership that comes with perks like an on-site daycare, or different fitness class options.
To do this, you might have to give up another expense – like spending $100 every Friday on an upscale date night with your spouse. When you’re pursuing a goal that’s as big as being a millionaire, you’re going to have to make some sacrifices. That’s not to say that you have to give up everything and live on a shoestring budget, but there are going to be times where you need to pick and choose.
1. Your traditional salary. Don’t forget to advocate for regular pay increases or bonuses for a job well done! 2. “Passive” income. Many people look at creating passive income through buying a rental property. Although this type of income isn’t truly passive (being a homeowner is tough work – even if you’re not living on the property!), it can help to boost your net worth over time. 3. Interest and dividends. Investing, or being a part-owner in a business, can provide an additional stream of income beyond your traditional salary. 4. Active income. This might be a side hustle, or an entrepreneurial venture that you pursue alongside your full-time job.
Leveraging as many of these as possible helps you to grow your wealth quickly, and it compounds in growth over time.
Max Out Retirement Savings
Being a millionaire is a goal that many people will likely achieve as they retire. Retirement savings vehicles can help you to grow your wealth through smart investing strategies while also reducing your taxable income right now. A few good places to start focusing your retirement savings might be:
1. A 401(k). The maximum allowable contribution to this account is $19,000 in 2019, with an extra $6,000 if you’re 50 or older. 2. A Traditional IRA. Contributions to a Traditional IRA are pre-tax, and they lower your current taxable income. In 2019, you can contribute up to $6,000 to your Traditional IRA, or $7,000 if you’re 50+. 3. A Roth IRA. Roth IRAs are funded with after-tax money. You can contribute up to $6,000 under age 50 through a Roth IRA, plus a $1,000 “catch up” contribution if you’re over age 50. So, while they don’t reduce your taxable income right now, they do help you save on taxes in retirement when (theoretically) your income will be higher than it is now, and you’d owe more in taxes on the gains your IRA funds have earned.
Create a Financial Plan
Finally, if your goal is to become a millionaire, you need a financial plan in place that’s revisited and adjusted regularly. Becoming a millionaire is a big goal to set for yourself, and a plan can help you to outline the clear steps you and your family need to be taking to get there.
Speaking with a financial planner who can walk you through every element of your financial life, and how it impacts your long-term wealth goals can be a huge help in both keeping organized and looking at all of the options you have available to you. Interested in learning more? Get started by scheduling a call today.
Marriage is all about the combining of two elements. Two people, two households, two families – and usually two sets of finances. That’s why I’m never surprised when the first question I hear from my married clients is, “Should we merge our bank accounts?”
Deciding how to deal with money in a marriage is tricky, and what works for one couple might be disastrous for another. If you’re engaged to be married – or know someone who is – here are some considerations couples should take into account before deciding whether or not to combine finances.
The Case for Combining
One bank account simplifies everyday transactions because every expense is shared equally. There’s no question of who’s turn it is to pick up the dog food or the dry cleaning. There’s no need to keep tabs of who paid last month’s rent or the mortgage bill.
It can also strengthen the notion that each person is part of a team and not a solo player. For the fiercely independent, combining finances can be an opportunity to let their guard down and embrace a more vulnerable approach to marriage. A few other benefits to merging your finances are:
Joint accounts allow for full disclosure. You’re able to see what both you and your partner are spending and can check-in with each other along the way.
It’s easy to manage. Paychecks are deposited to one place. Bill payments, groceries, dining out, and all other monthly expenses come from that same place. Who pays for what doesn’t become an issue. Sounds easy enough.
While bills will get paid and goals funded whether accounts are merged or kept separate, when operating with a joint account, spending habits are revealed and your spouse may turn into your accountability partner in reaching joint goals and helping you kick habits that may be detrimental to your financial success.
Personally, my hubby and I merged finances and even share a main credit card at this point (although we both have separate cards for credit score purposes). We leverage one card to maximize credit card points towards travel and by following an “unbudget” we give ourselves an amount to spend every two weeks we please. We’ve found that this keeps us on track for our bills and goals, and allows us the freedom and flexibility to spend as we’d like within our limits.
Drawbacks of Combining Finances
Keep in mind that mixing money doesn’t prevent marital discord. In fact, money is one of the biggest tension-causers in a marriage. A saver could be shocked at their spouse’s daily latte intake, while a spender might feel like a child being nagged.
If there are stark differences in how each spouse approaches money, they’ll become apparent very quickly. The best way to prevent disagreements is to establish a compromise early on. Couples who combine their finances can still have allowances to spend money as they wish. Each person receives a set amount every month to use on discretionary items like clothes, concert tickets or hobbies.
Smiling About Separate Finances
For second or third marriages where both parties have established retirement accounts and assets, more experts will recommend staying separate. Older couples often keep their finances separate after marriage, especially if they have kids from previous relationships. It can be too complicated to merge everything after decades of separation. People who have been in abusive relationships might also feel more secure and autonomous having separate finances.
Two accounts can also prevent financial disputes and unnecessary conversations – like why your partner buys a new fishing pole if they already have five in the garage. It promotes an element of personal responsibility, where each spouse is responsible for their own financial well-being – and therefore free to spend as they please.
With separate finances, couples can still work together to pay the bills. They can set up a joint account where each person contributes an equal amount, or a sum proportional to their income. This system can be used for all household bills, as well as any family emergencies that crop up.
Reasons to Smile
There’s no awkwardness about income ranges. When one spouse makes more than the other, having separate accounts and dividing up the bill payments accordingly can help each to feel like they are contributing, but not carrying the full weight of the payments due.
Debt is kept separate. When either spouse is bringing debt into the marriage, it may make sense to keep things separate until debt is paid off. This will allow the spouse with the debt to work on spending and money management skills and ensure healthy habits are formed before combining.
Habits don’t need to be changed. You put aside what is needed for bills and goals and whatever is left is yours to do with. This is ideal when one partner spends more or less than the other. Spending habits, from frequency to size of expenditures, can cause tension when they’re differing.
You can combine forces when paying bills. You can choose to keep all items separate and divvy up joint bills for payment, or you can maintain your separate accounts and open a joint account meant for paying household bills out of.
Drawbacks of Separate Finances
Some experts think that separate accounts build distrust and acrimony between couples. Others say it’s the same as individual email addresses, and allows each party to maintain some semblance of independence. Ultimately, if you choose to keep separate finances, the key is to communicate about your expectations. How are you going to handle shared bills? Who is going to pick up the tab when you go out to eat? Are you only keeping some of your finances separate? These are all questions that you should be able to answer together.
Commitment & Communication
Whether you choose to merge your money or keep separate accounts, communication and commitment are key! If you’re merging finances, determine how you’ll manage the accounts and spending. If you’re keeping things separate, assign how and who will pay which bills and determine amounts to allocate towards joint goal funding.
Remember, separate accounts don’t mean separate goals, and it’s not an excuse to keep financial secrets. Set a schedule for money dates or regular check-in’s, and be sure to evaluate your strategies as your situation changes.
Fights over finances can stem from a number of causes, ranging from disagreements over goals and priorities to feelings of anger and resentment over who earns more. Sometimes it can be a challenge to make smart money choices together.
Here’s the good news: arguing over money doesn’t need to be the norm in your relationship. You can reduce anxiety, fear, and other negative emotions over your household finances by taking action to become a financially savvy couple who feels confident and excited about the future.
And most importantly, you can feel financially in tune with your partner so that money fights don’t happen in your house. So, what money choices can you start making together? And how do you get on the same page?
Talk It Out
You need to be communicating about your finances from the early days of your relationship. If you’re already a few years in – better late than never! The first step to becoming a financially savvy couple: communicate! Remember, you’re a team and you can work together to achieve your goals and get what you want. But you can’t do this successfully if you don’t speak up, share your ideas, and understand what your partner thinks.
Always be honest, remain open, and don’t bottle up negative feelings.
Set up a framework to ensure each person’s thoughts and ideas are heard on a regular basis. Put a monthly “money date” on your calendar. Take 30 minutes to an hour once a month to sit down with your partner and go over all of your finances.
Look at your budget, pull up your bank and credit card accounts, examine your bills, and look at your retirement fund and investments. Evaluate what happened with your money last month, and make a plan to correct any mistakes or reign in any runaway spending for the upcoming month.
Then, brainstorm ways you can continue to improve your current actions with your finances. Save some time at the end to discuss goals, hopes, and dreams and ways you can continue to feel motivated and inspired to work for those things.
When you sit down for regular check-in’s, or “money dates” to talk about your finances as a couple, it can be helpful to ask each other questions and listen to your answers. A few of the questions you can be asking one another are:
Are we combining our bank accounts?
What’s our monthly budget?
Are we staying on track to meet our financial goals?
What are our financial goals?
Who is in charge of the day-to-day finances?
Are you happy with how we’ve been handling our money?
Having these conversations on a regularly scheduled basis is key to finding your financial footing as a couple.
Set Goals as a Team
If one of you is set on paying down your debt, and the other is focused on fully funding your retirement savings, you may have to pick and choose which goals get prioritized. In an ideal world, we’d all be on the same page about our financial priorities, but that doesn’t always happen. Checking in regularly to better understand what your goals are, and if priorities have shifted, is incredibly important.
Couples who are financially savvy understand the importance of staying organized. This can help with everything from small, everyday situations to your big annual trip to your accountant’s office to file taxes.
When you keep records and document all aspects of your finances, you create a detailed source of information when you have questions or aren’t sure about the right decision to make. You can reference your files to solve problems, answer questions, and realize what money moves make the most sense for you in the present.
And of course, keeping records of your cash flow — in other words, keeping a budget — means you stay on track for the future, too.
Track Your Progress
Don’t let your money run wild without supervision. Financially savvy couples track income and spending so they can evaluate whether or not they’re putting their available dollars to the best use.
Another smart money move once you’ve started tracking your finances: measure your progress! Each month, measure how much your savings has grown. Keep tabs on your home value. See if your income is growing or staying stable.
You can also put all these metrics together to measure your net worth. This is a good indication of your overall financial health.
When you track and measure, you understand what’s going on and you can see your progress over time — and that can be a huge motivating factor to help you keep going.
Focus on Debt
Debt is a huge point of contention amongst couples, so focusing on a gameplan to knock it out together can take a lot of financial pressure off of your relationship. If you have multiple debts, they may feel completely overwhelming. Before you panic, know that you and your partner can do this! And there are a few strategies you can use to help make it easier. The first strategy is known as the avalanche method.
This method directs you to prioritize your debts by their interest rates. You work to pay off the debt with the highest interest rate first (while still paying the minimums on your other debts). Mathematically, this makes the most sense. The interest rates on loans and credit cards cost you more the longer you hold on to them, and of course higher rates cost you the most. But some people find it really intimidating to try and tackle their biggest, baddest debt as the first step toward debt freedom.
If you prefer to start small, you can try a different strategy that comes at the problem from the other end. This strategy, known as the snowball method, involves prioritizing debts in order of the amount of money you owe. You start with the debt with the smallest balance and work your way up, regardless of interest rate.
This is helpful for those that feel discouraged by the amount of debt they’re in, as it should give them a quick win. However, it may not be the most financially efficient way to deal with all of your debt. You may end up paying more in the long run if you let high interest rate debts sit on the back burner while repaying other balances. What matters is that you’re making progress with your debt and moving in the right direction. It’s best to just start. If there’s one debt really weighing on you emotionally, tackle that first!
Discuss Your Investing Strategy
If you don’t know anything about finances or investing, recognize that you need to increase your financial literacy. Ask for help from a professional, start reading up on personal finance books, and look into educational courses on money and investments that you can take together. You don’t need to be financial experts before you start investing, but you do need to understand the fundamentals so you aren’t throwing your money around blindly. Start by reading this post on How to Get Started with Investing and then following up with Basic Investing Terms You Should Know part one and part two.
Keep Learning Together
The couple that learns about money together stays together! Sure, it sounds a little silly, but communicating and constantly adding to your financial knowledge as a couple goes a long way. Disagreements and misunderstandings about money lead to serious marital stress.
Remember that you and your new spouse are a team and you’re working together towards what you want to achieve in life. It’s up to you to create an ideal, secure retirement for the two of you. No one else is going to take care of your financial needs in the future, so it’s important that you plan ahead and start saving now.
Buying your first home is not only a major life milestone, but it’s also a big financial goal to meet (one that comes with commitment and responsibility). While many consider a home an asset, this investment of your money is a decision to carefully consider before making.
Determine If Buying is Right For You
Look ahead to the next 3-5 years. Where do you see yourself? Do you see yourself getting married, changing careers or moving out of state in the next few years? What about incurring large expenses such as having children or buying a new car? Consider your current job and the stability associated with it. Can you expect to be there for the next few years?
Although you may feel the need to purchase a home now, if you’re facing any big transitions in the 2-3 years ahead, consider renting until the dust settles and you have more stability. While you may be able to sell a home that you purchased just a few years ago, being faced with having to make a quick decision or sale could hurt you financially. Additionally, basing your home buying decision on whether or not you can afford the home on your current salary if you don’t have job security could be problematic.
Finally, if you don’t have a 20% down payment saved up – wait to buy. I know, it’s really tempting to go for it anyways, but getting trapped with Private Mortgage Insurance (PMI) could require a notably higher payment each month than what you have budgeted for. PMI is private mortgage insurance, and it’s designed to protect the lender in case the borrower defaults on their loan. If you show up to the table with less than 20% of the purchase price to put down in cash, the lender will see you as riskier and place PMI on your loan. This is an additional monthly fee on top of everything else that makes up your mortgage payment.
How Do Your Student Loans Impact Your Home Buying Decision?
Buying a home is all about the numbers. One of the biggest numbers your lender will look for is your debt-to-income ratio, which should be 28% or less. In other words, the amount of your income that you spend on debt payments every month should be no more than 28% of your monthly budget.
The more you spend on debt, the more susceptible you are to default on those loans if you lose your job or have an emergency. If you have a lot of student loans, your ratio may be too high to qualify.
The second number is a down payment. Most lenders require some down payment when you buy a home – the traditional number being 20%.
If you’re buying a $600,000 home, saving a $120,000 down payment can seem impossible when you have student loans. Fortunately, there are other options. The Federal Housing Authority has a 3.5% down payment program that’s much easier for borrowers. If you’re a veteran or buying a house in a rural area, you may be able to find 0% down payment loans, but be aware of funding fees and ending up upside down on your home before you even close (i.e. owing more than the home is worth). Plus, keep in mind that the less you put down on a home, the higher your monthly mortgage payment will be and the less you’ll have in cash flow to fund other goals like retirement, travel, entertainment, and college funding.
Know Your Credit Score
Your credit score is an important factor in your ability to qualify for a mortgage and a great interest rate. The higher your credit score, the lower interest rate you’ll qualify for and the more attractive you’ll be to lenders. Making timely payments on your loans and debts can raise your credit score and help you to qualify you for a mortgage. Minimizing consumer debt such as car loans and credit cards can also help in this area.
You can check your credit report through the three major credit bureaus at annualcreditreport.com or your score through a website like creditkarma.com. Some banks and credit card companies also give you access to your credit report for free on your monthly statement.
How Much Home Can You Really Afford?
When narrowing down on a purchase price for your future home, don’t just look at your current budget to determine if your new mortgage amount will work. Also factor in additional home maintenance, HOA and utility costs. If there are plans for growing your family, determine if you can afford child care AND your new mortgage payment. Also evaluate if you’re saving enough for retirement or if you’ll be able to steadily increase the amount you’re setting aside when you make your purchase. Oftentimes people over-commit to the amount they can afford based on what an online calculator tells them, but those calculators don’t factor in real-life situations.
Can you afford to both purchase your home and maintain the property? Whether you’re using a gift, loan from parents or savings to cover the down payment on a home, it’s important to maintain an adequate emergency fund for repairs and to factor items such as monthly maintenance, homeowner’s association dues, property taxes and insurance into your budget. Also be sure to consider if you need to do repairs, paint, purchase furniture, appliances or fixtures, and factor in closing and moving costs into your expenses.
A good rule of thumb to consider is that no more than 28% of your gross monthly income should be used to pay for PITI (principal, interest, taxes and insurance). The good news with a home purchase is that you’ll be locking in a consistent payment each month that won’t be subject to ongoing increases you may have faced with rent.
Saving for a Down Payment
Even a 3.5% down payment on a $200,000 home requires you to save $7,000 – not including any closing costs and fees. And ideally, you’ll be saving at least a 20% down payment to have more manageable monthly payments.
Go through your budget and see where you can cut to save for a down payment. Can you lose the gym membership you’re barely using or the subscription boxes that pile up each month? Can you cut back on eating out until you’ve bought your home? Cutting large expenses can be effective, but sometimes it’s better to make small changes in several areas at once.
Some people also pick up side gigs to pay for their down payment faster. One way to ensure success is to decide how much you need to save every month and then set up automatic transfers into an account established specifically for your down payment at your bank. You can continue doing this after you save your down payment to create a special emergency fund for your new home.
The bottom line is that you can effectively save enough money to purchase a home. However, it’s important to consider factors like your income, the cost of homes in your area, your current life stage, if there are any transitions on the horizon, and where owning a home fits into your overall financial picture. You don’t want to have so much home that you’re not able to save for other important financial goals in your life.
Most people have probably heard this Chinese proverb: the best time to plant a tree was yesterday. The second best time is now. Investing is no different – the sooner you start, the better. But how do you start investing (especially when you feel like there’s so much information floating around with no clear-cut direction)? Thankfully, wading into the world of investing isn’t as scary as you might think. Mutual funds and exchange-traded funds are great options for the new investor and they don’t take a finance degree to figure out. Read on to learn how you can go from being a green investor to a grizzled veteran.
Know Your Why
The first thing to lock down is your reason for investing. Do you want to fund a nest egg for your retirement? Do you want to save for your child’s education? Do you want to create wealth to last for generations? Having a clear reason will help determine what you invest in, what your timeline is, and how much money you need.
Your why is completely unique to you – and that’s what makes it so exciting! You get to decide why you’re pursuing investing, and what kinds of results you’re looking to achieve. Keeping your “why” in mind with every decision you make can help you to avoid emotional selling decisions during a market downturn, or say “no” to short-term investment opportunities if you’re invested with long-term goals in mind.
Are Your Investments Diversified?
Don’t carry all of your eggs in one basket! Make sure you’re diversifying your investments.
Investors should aim to have a diverse portfolio, made up of national and international companies and small and large firms. Some companies provide more growth while others yield income for the investor. A mix of income and growth companies is vital.
Most people hear about the stock market in terms of companies like Apple, Google and General Motors. But a better way to gauge the overall economy is through indexes such as the Dow Jones Industrial Average or the S&P 500. These indexes act as holistic snapshots of the stock market and avoid focusing on specific companies or areas of the market.
To diversify between asset categories, you’ll want to choose a certain percentage of each asset according to your goals and your situation. This distribution of stocks, bonds, and cash is called your asset allocation. Consider two important things when making your decision:
First, consider your time horizon. Do you want the money for a house payment in five years? If so, you’ll want more low risk, lower return assets. If the money is meant for retirement, include high return, higher risk stock investments to generate a larger nest egg.
Second, consider your risk tolerance. Will you still be able to sleep at night if your investments drop in value? If so, how much of a drop can you take? Withdrawing money when your investments are down will decimate your investment returns.
Just as it’s important to diversify your investments among different asset classes, it’s also important to diversify within each class. To diversify by location, consider how many international investments you’d like to make. This will help your portfolio continue to grow when the U.S. market is struggling.
For stocks, think about owning companies of different sizes. Stocks are classified according to market capitalization or “market cap.” That’s the total value of the company’s outstanding stock in the market. It’s also important to own a wide variety of sectors, i.e. technology, energy, and more. For bonds, consider buying different types like government bonds, corporate bonds, and high-yield bonds. This will help your portfolio grow during many interest rate environments.
Consider Your Timeline
If you’re investing for a specific purpose, like retirement, you might want to invest according to the amount of time you have before that single goal. In these cases, a target date fund might be worth looking into.
Target date funds are a basket of funds designed for investors who want an easy retirement option. Like their name, these funds are organized by date. Investors can choose which fund they want based on the corresponding year in which they hope to retire.
For example, a 25-year-old may choose a 2055 target-date fund, when they’ll be 65 years old. So how exactly do the funds change over time? Like with most investment strategies, it’s all about intelligently handling market risk. As the investor gets older, the fund automatically rebalances to become more conservative over time.
The fund that a 25-year-old purchases will be allocated towards safer investments when that consumer is 40, and even safer when they’re 60. Many investors who want to save for retirement are unable, uninterested or uncertain of their ability to choose their own funds.
Creating a solid mix of funds can require hours of research, and staying on top of their allocation can be a chore even for the most seasoned financial professional. That’s why target-date funds are so popular; they already have the funds and investment strategy chosen for you.
Too many people choose a target-date fund based on inappropriate considerations. Instead of choosing it based on the date you hope to retire by, consider your tolerance for risk. Some people may be more tolerant and need to invest more aggressively, while others are more conservative.
Don’t assume that you have to stick with the date that works for your age. And as you look at different target-date fund options, be sure to watch out for high fees! These funds are notorious for being on the pricier side, and you want to make sure your investment is getting the most bang for your buck.
When you’re a new investor, the key is to start small and think big. You shouldn’t throw your life savings into the stock market right away; take some time to learn the process and monitor how your funds are performing. Once you’ve mastered the basics, you can start building towards a financial future to look forward to. That’s when investing really starts to get fun.
Want to learn more? I’d love to talk to you! Schedule a consultation today, and we can go over your concerns as you get started on your journey as a new investor.
Building a business is tough work, and sometimes it can be hard to gauge what income goals you should be reaching for. This lack of clarity stems from two places:
1. Business owners aren’t sure what income goals make sense for their business because they’ve never done this before. It’s tough to know how much you should be striving to make when you have no past experiences to compare your business growth to! A lot of times, all a solopreneur has to work with are best guesses on what income goals are reasonable.
2. It can be demoralizing to set income goals (even reasonable ones) as a business owner. Self-doubt creeps in, and it feels easier to not set any goals at all. Negative questions start to rattle around in your mind: What if I don’t hit those goals? Does that devalue my business or my hard work?
The hard truth is that as a solopreneur, you need income goals to guide your business development decisions. To do this, you need to get clear on what a reasonable goal to aim for is, and what you actually need to support your business and your family.
The process of setting goals doesn’t have to be overwhelming! You can get started in four easy steps.
#1: Understand What You’re Building
Simon Sinek said it best: Start with why. When you know why you’re doing what you do, and what your long-term vision is for both yourself and your business, you’re better equipped to set income goals that reflect your “why.”
For example, let’s say you’ve started a small social media management business while your kids are in middle school. You’re passionate about the work you’re doing and the clients you’re able to connect with virtually, but your ultimate “why” is that you want to make enough money to put your kids through college debt-free. You already have some savings set aside for them, but your business over the next several years is going to be the primary contributor to that savings before they graduate high school. Then, when they’re all graduated from college, you plan on retiring.
That’s a big, exciting why!
Even if this example doesn’t resonate with you, don’t be afraid to dig deeper and ask yourself the hard questions about your why and your long-term goals:
Are you building your business to sell and make a profit in the next few years? Are you wanting your business to continue on after you’re gone? Is it a business that was born out of necessity because you had bills to pay? Will your business dissolve when you retire?
Knowing what you’re building, and why you’re building it, can help to guide your revenue goals. Remembering our example above, the income goals of a social media manager hustling to put her kids through college (but will retire after they’re graduated) are going to look different than someone who is building a large-scale marketing firm with multiple employees that will likely be passed on through a succession plan or bought out when the founder is ready to retire.
When you understand what you’re building, you can create a strategy around profit margins, equity, and spending patterns. Every decision you make will ultimately support your short and long-term business development goals.
#2: Understand What You Need
As a business owner, you need to know what you need to bring home for your family that allows you to meet your personal financial goals and obligations. This includes any household spending plus saving for travel, retirement, your children’s college education, and any other goals you might have.
It can be helpful to create two sets of numbers here:
What you need to bring home to survive.
What you need to bring home to meet all of your financial goals and obligations.
This information can help to guide your goal setting and gives you both an attainable income goal and a goal that you can “reach” for. It can also help you to set a more reasonable goal for yourself somewhere between these two numbers. Too many people feel the need to always strive for their “reach” goal, and are disappointed with anything less. The truth is, if you’re able to meet all of your family’s immediate needs and start growing toward big-picture savings goals simultaneously, you’ll feel less pressured and could actually find more success in the long run as you grow.
#3: Know Your Business Costs
No business is 100% free to run. Even if your business is low-cost, and all you need is you and your laptop, other expenses will inevitably crop up as you grow.
Some common expenses solopreneurs might need to consider are:
A computer security program, like McAfee or Norton Antivirus
A paid Dropbox account for document sharing with clients
A logo designed by a professional
Fees taken out of credit or debit card payments made through your payment processor or invoicing program
Childcare once a week so that you can take phone calls at your home office without interruptions
Materials to create the products you sell
Rent and utilities if you’re renting an office
Salary for your employees
Again, it can be helpful to make two lists. Your first list should be the bare-minimum expenses you need to run your business successfully. The second list should be the list of expenses that you’d have if you were spending in a way that aligned with your business development and long-term goals. Don’t be afraid to think outside of the box here. Ask yourself honestly: what do I need in order to run my business successfully? What would I spend revenue on if I knew it was going to help me grow?
#4: Build Your Income Goals
Once you know what it costs to run your business successfully, and how much you need to bring home you can start to create a strategy for generating income. For example, if you need to bring home $125,000 to your household and your business operating expenses are $70,000, here’s what your business income goals could look like:
Income Goal / Potential Gross Income: $250,000 (This accounts for the below)
Business Operating Expenses: -$70,000
Potential Net Income: $180,000
Assume 30% Taxes: -$54,000
Take home income to you: $126,000
Keep in mind that this is a very basic example. It doesn’t take into consideration things like salaries, adjusting taxes for qualified retirement plan contributions, and more. However, it does help to point you in the right direction.
If you want to keep with our running theme of creating two gross income goals (one that’s the bare-minimum of what your business and your family needs, and one that’s a “reach” goal), feel free! It can be helpful to know what you absolutely need to make ends meet, and what you’d like to make to help you start living your best life.
A Word of Advice (Or Two)
When you’re setting income goals for your small business, remember that you can’t fall into the comparison trap – even with those who are in your same industry. Your income goals are going to be unique to you. Only you can know what you need personally and professionally to feel fulfilled.
It’s also important to remember that your income goal should be specific! Aiming for a “six figure” gross income for your small business isn’t specific enough. You need to aim for an amount that will net you an income that helps you to reach your personal goals, and live a happy and fulfilled life.
Still struggling? Setting income goals for your small business can be overwhelming, even when you know how to go about it! Finding the motivation to set these goals alone can be tough, especially when you’re a busy solopreneur.
Working with a financial planner who has experience helping business owners create a plan that reflects their personal and professional goals can be a big help. If you’re ready to change your relationship with money and start working your wealth, schedule a consultation by clicking here! I’d love to help you set goals that leave you feeling fulfilled, and build a strategy for achieving them.
Most Americans have one thing on their minds this time of year: how to make next year even better! Although we may take a moment to look back on the past 12 months and celebrate our big “wins”, it’s still healthy to look ahead toward growth and improvement. One thing you might be thinking about “leveling up” next year is your finances. But I have a secret for you:
You don’t have to wait until January to get started.
You can start making some amazing year-end money moves right now that will set you up for success in the new year!
Do An Annual Financial Review
To know where you’re going, you need to know where you’ve been. Look at the goals you’ve set, and whether or not you’ve achieved them. If you did – congrats! Do you need to set more advanced goals for next year? If you didn’t – what got in your way? Did unexpected expenses crop up? Did you experience a major life change? Or were your goals unreasonable? You should also evaluate your budget, where you stand with your current debts, and your net worth statement. Do all of these feel like they’re still in line with your goals for next year?
Update Your Budget
No matter how much things seem to stay the same, something changes every year. People change jobs, get engaged, welcome a new family member, or buy a new house. Any number of things can happen throughout the year, which means evaluating and updating your budget should be an annual exercise. Accomplishing your goals starts with setting a realistic budget. Evaluate some of the big things you spent money on and ask yourself, is there a way you could cut back on certain expenses? Can you cut costs entirely to make room for other priorities? Now may be a good time to renegotiate rates, especially car insurance and cell phone bills.
Where Is Life Taking You?
Do you have any big expenses coming up in the next 12 months? This might mean you’re:
Purchasing a home
Starting your family
Starting your own business
Moving out of state
Buying a rental property
Refinishing part of your home
Planning a big, exciting trip
Whatever your big plans are for next year, make sure you’ve thought through the financial side of them, too!
Spend Down Your FSA
Whether you have a health-focused FSA or a Dependent Care FSA, now is the time to use it or lose it! Some employer-offered flexible savings accounts require you to spend all the money you’ve accumulated over the year before December 31. Don’t let this money slip through your fingers simply because you didn’t visit the doctor enough. Not sure what you can spend your flexible savings account on? Check out this list of approved expenses.
Check Your Investments
As we close out the year, it’s time to check out your portfolio and evaluate its performance. This year had some ups and downs, so you could have either gained or lost money this year. Depending on your situation, discuss with your tax professional or Certified Financial Planner and see if it would benefit you to do tax-loss harvesting. If you do decide to sell some of your investments, the end of the year is also a good time to ensure your portfolio is balanced with a diversified mix of investments. Again, how you balance your portfolio will depend on your situation, and your tax professional or CFP can give you more guidance.
Fund Your Retirement Accounts or HSA
You only have until December 31st to max out your workplace retirement accounts (like a 401(k)) or your Health Savings Account. If there’s a little extra wiggle-room in your annual budget, now is the time to make it happen!
While most Americans won’t be itemizing their taxes under the new tax law, many of them still will be considering whether or not to give to charity this time of year. Although your donations aren’t deductible if you don’t itemize next filing season, that doesn’t mean you shouldn’t give back! Many of us have more than enough and, at the end of the day, giving to a charity or organization you’re passionate about is a fantastic way to spend your excess wealth. An added benefit is that charitable giving is emotionally fulfilling – meaning you may be less likely to overspend in other areas of your life as a result of being philanthropic!
Automate What You Can
Are your bills paid automatically each month? Do you have automated contributions to your retirement or savings accounts set up? How about automated extra payments toward your debt? When we have to manually decide to make financially wise decisions, we’re way less likely to follow through. Give yourself a leg-up for next year and automate everything you can before December 31st.
Talk to a Financial Planner
The best way to get organized for next year is to get in touch with a financial planner. A financial planner can help you to:
Map out your short and long-term financial goals
Set up automated bill payments, savings, and extra debt repayment
Organize your budget
Figure out what financial roadblocks you’ve faced in the past, and how to navigate around them in the future when they crop up
Invest your funds in a way that aligns with your financial goals and personal values
Sounds pretty great, right?
If you’re ready to take the next step in your financial life next year, I encourage you to reach out!
Buying a rental property is an exciting idea. Many popular bloggers, podcasters, and HGTV show hosts make it look so easy – but is it really?
In the world of Pinterest and Fixer Upper, home renovations and rentals seem easier than ever. Unfortunately, that’s not usually the case. The cost of a home renovation and the stress of renting it out to short or long term renters often makes the process a financial (and emotional) loss. Let’s look at what you need to consider before moving forward with a rental property purchase.
#1: Who’s Responsible for Upkeep?
If you’re renting out your property to short-term vacation renters, you’ll need to consider who’s going to clean your property and get it ready for guests in the turnaround time you have between departures and arrivals. If you’re renting out your property to long-term tenants, you still need to have a contractor or maintenance company on-call who can help you take care of the property if something goes wrong. Sometimes, landlords are able to outsource these tasks in an affordable way (but keep in mind, the more you outsource, the more of your profit you’re giving away), which leads us to the next item to consider:
#2: Will You Make a Profit?
This is easily one of your biggest considerations. It’s easy to assume you’ll make a profit when you ballpark the numbers and only look at the best-case-scenario. Don’t do this to yourself. You don’t want to purchase a home under the assumption that you’ll turn a profit by renting it out, only to be surprised by a few unexpected expenses and a slow renting season. Before you buy, do the following:
Evaluate the local rental market
Know what you expect to spend both to purchase the property and to maintain it
Estimate how long it will take you to actually turn a profit or make back what you’ve invested
#3: How Will This Impact Your Taxes?
Being a landlord comes with a different set of tax expectations than just being a traditional homeowner. Make sure you include property tax estimates, as well as income tax on your rental income, in your financial projections. High property taxes could offset any revenue you bring in from the property each year. As a landlord, you also have a set of tax deductions you may be able to take advantage of. While you may have a positive or break-even cash flow situation, by factoring in depreciation, you could have a tax loss each year. Speaking with an accountant and financial planner to understand the numbers and what you need to do to remain organized for filing season is in your best interest.
#4: Do You Have the Right Insurance?
As a landlord, you’ll need to decide what type of insurance coverage you’ll need for your investment property. Although sites like Airbnb and VRBO both have some insurance protection for their hosts, your insurance company could potentially deny you coverage if they find out the property is being used commercially. You’ll also need to weigh the pros and cons of taking on a higher monthly premium that offers you broader coverage as a landlord versus skimping on coverage but having a high deductible. Note: As a financial planner, I’m going to go ahead and tell you to get the landlord insurance. Don’t take unnecessary risks here.
#5: Do You Have an Expanded Emergency Savings?
It’s beneficial to calculate the costs of replacing or repairing a few of your property’s big-ticket components. Think of worst-case-scenarios, then call around for estimates. A few worth looking at are:
Plumbing (nobody wants a burst pipe or an out-of-service toilet, especially if you’re a renter)
Replacing major appliances if they go out
Knowing what some of these costs might be ahead of time can help you to set a reasonable savings goal. That account should be earmarked specifically for rental property expenses to help you avoid going into debt if you’re faced with an emergency.
#6: Are You Emotionally Ready to Be a Landlord?
Most people assume that renting out their property will be easy. In many cases that might be true, but life happens. Sometimes pipes burst in the middle of a holiday. Or your guest tries checking in after their flight lands late at night and can’t find the key. As a landlord or host, you need to be prepared to handle these situations in the moment. In some cases, you might find you can outsource this on-call duty to a property manager, but that’s an added expense you’ll need to keep in mind when deciding if this venture is a worthwhile investment.
Is A Rental Property Right For You?
Truth be told, for most people the answer to this question is a simple no. Rental properties are fairly trendy right now because of the prevalence of organizations like Airbnb and VRBO that make renting your home seem easy. However, for the majority of people, this investment just isn’t one that makes good financial sense. Rental properties can be time consuming, and often are more costly than they’re worth in potential revenue. However, there are a few cases where a rental property might work for you. I always tell clients you need to check four items off your list before moving forward with purchasing a rental property:
1. A financial plan that supports the property purchase and ongoing costs. This means you’ve estimated insurance, taxes, cost for upkeep and cleaning between guests or tenants, costs for updates, a sizable nest egg in case you need to do a major repair, and a down payment that offsets the financial burden of the mortgage.
2. Knowledge of the area. Purchasing a rental home in Hawaii when you’re landlocked in Nebraska probably isn’t in your best interest. It’s better to buy in your local area, or another area where you have a wealth of knowledge about the local real estate and rental market. You need to make sure this investment is going to turn a profit, and that means that property values have to be consistently on the upward trajectory and the rental market hasn’t experienced a slump in a while.
3. A purpose for the home. Do you want a rental home because it sounds like easy money, and you’ll have a cool place to vacation? That’s likely not a good enough reason. Purchasing a rental property means having a long-term strategy for the revenue. Are you using it to reach a savings goal? Or to invest? Are you planning to spend time on the rental property, or is for tenants only? Will the home require a lot of upkeep as the years go on? Do you have a solid exit strategy for when you’re done being a landlord? Having a purpose when purchasing your rental property and knowing your strategy going in is a must.
4. Time. Rental properties are a huge time commitment. The initial search and purchase, renovations to get the property renter-ready, ongoing maintenance, and renter interactions – all of these things are time consuming. I always tell people that if you’re not willing to get up in the middle of the night because someone has called about a pipe bursting in your rental property, you’re not ready to purchase one. Always go into rental property purchases knowing that they’re a time commitment, and make sure the return on your investment is worth the time you’re spending.
Are you considering a rental property? Don’t dive in without knowing whether or not it works for your unique financial situation. Let’s chat about whether a rental property will help you achieve your goals, or if there’s a different and better solution out there.
There’s a lot of talk in the world of personal finance about the importance of having multiple income streams. On a high level, having multiple streams of income helping you reach your financial goals sounds pretty great. However, it can be tough to know where to start – especially if you’ve only ever worked a traditional 9-5 job. When you start building a strategy for creating different income streams, it’s important to know a few different things:
1. Why these different streams of income are important, or what goals they’re going to help you achieve
2. What types of income streams are available to you
3. What types of income projects make the most sense for you and your family
As always, the most important thing on this list is your why.
Why Should You Have Multiple Income Streams?
For most people, the income they receive from their full-time job is enough to cover most of their budgeting basics. Some months may be tighter than others, but they often feel stuck because they’re not sure how to consistently live more comfortably without asking for a raise every 3-6 months. This is where having multiple streams of income can help.
Developing different streams of income empowers you to reach your goals more quickly, protects you against the possibility of losing one income stream, and helps you to grow your wealth for the long-term. All of these things can be part of your why for developing multiple streams of income, but you should also think through tangible reasons and benefits that are relevant to you.
For example, are you looking to grow your cash flow each month to travel more? Do you want to use the extra income you’re earning to save for your child’s college education? Are you working toward a short-term savings goal, like a home purchase? Do you have a hefty debt load that you want to pay off ASAP? Knowing your unique “why” will help you to stay motivated, even when building multiple streams of income feels overwhelming or tiring.
If you’re single, your primary income is the only primary income you have to think about. However, if you and your partner share finances, one of you likely acts as the “breadwinner.” Many of my clients are women and are also the breadwinners in their families, but that’s not always the case. Regardless of who the primary income is coming from, the income itself usually checks a few boxes:
It covers all or most of your expenses
It’s a W-2 income, or a steady income from self-employment
It’s the most reliable of your income streams
Primary income is usually the paycheck that comes from your full-time job every other Friday. The benefits of having a steady primary income are that you can typically always count on it as a baseline for your budgeting and financial planning. However, if you’re 100% reliant on your primary income, you run the risk of financial instability if you should ever lose your job or become unable to work.
Many people look to increase their passive income first, for obvious reasons. Our full time work can be exhausting. When we pile on all of our other responsibilities, there aren’t very many hours left in the day to grow multiple, active income streams. Figuring out how to incorporate passive income into your financial plan is one of the best ways to start increasing your cash flow and growing toward your goals. However, not all passive income is created equal.
The Passive Income Myth
The idea of passive income is incredibly appealing for most people. In today’s world with increased access to resources and tools through Pinterest, podcasts, different blogs, and social media – there are hundreds of thousands of people out there selling the idea that they’ve “made it” overnight using passive income strategies. They might be promoting their recent blog, their sponsored podcast, or an affiliate program they’re participating in. There are two things to keep in mind here:
1. Nobody is an overnight success.
2. The “passive” income strategies they’re promoting usually aren’t 100% passive.
The truth is that passive income takes time in the vast majority of cases. Building a blog, selling affiliate courses, or selling an online product or services requires a big investment of time up front. With time, that investment can start to pay off, with minimal ongoing work from you. However, on the front end, these are definitely not “passive” income streams.
Interest and Dividends
One of the only true ways to earn passive income is to grow the money you currently have through investing. Dividends are the share of the profit you bring home as the part owner of a company (which you are when you purchase stock). Interest, on the other hand, is money you earn on a loan you give to a company. When you buy their stock, you’re technically loaning them funds, and those funds earn interest over time. Investments that earn interest, or pay dividends, tend to grow. The key is spending time in the market, and investing for the long-term rather than seeking a quick pay out.
Although you may need to spend some time up front coordinating your investments or working with a financial planner who manages them for you, adjusting your portfolio quarterly or annually to stay on track to meet your goals is by far the least time-consuming of other so-called “passive” income strategies you could pursue.
Many additional income streams that people choose to incorporate into their financial plan are relatively active. Although the revenue might be recurring, these revenue models require work on your part. How much work you’re willing to pour into these active income streams is entirely up to you! Some will require more than others, and some will be more enjoyable for you than others. Typically, I recommend that people pursue active income streams that energize them. This is especially true if you’re already working full time and have a limited amount of hours in a day to dedicate to this secondary income stream.
The “Side Hustle”
Most people who are pursuing an additional stream of income pursue a side hustle. This side hustle is a job or freelance work that you take on in addition to your full time career. In many cases, people’s side hustle evolves into their full time job, especially if they pursue something they’re passionate about. I’ve seen side hustles take many different forms. A few ideas might be:
Starting a monetized blog
Growing your social media presence and promoting products through affiliate programs
Selling a course or online product
Repurposing items and selling them for a profit on Facebook Marketplace, Craigslist, or eBay
Picking up freelance writing, editing, or graphic design work
Dog walking and pet sitting through the Rover app (or by advertising around your neighborhood)
Selling handmade products through sites like Etsy or in-person at your local farmer’s market
Purchasing a rental property and becoming hosts on sites like Airbnb or VRBO, or renting it out to long-term tenants (remember: this is a lot more labor-intensive than it sounds)
Side hustles can be tough work, but if you pursue work that you love doing, it will help keep you motivated even when you’re feeling the strain of working in addition to your full time job.
Adding Income Isn’t the Only Way
Although having multiple streams of income can help you achieve many of your financial goals, it isn’t the only way to free up cash flow, build your savings, or pay down debt more quickly. In fact in some cases it makes more sense to find ways you can cut expenses rather than burn yourself out trying to grow your income. Everyone’s situation is unique, which is why it’s so important to create a comprehensive financial plan that puts you on track to meet your goals without totally sacrificing a comfortable lifestyle, your values, or time with the ones you love.