A side hustle can be an excellent way to earn a little (or a lot) of extra income — depending on what kind of attention and energy you put into it. After all, developing a second skill to up your cash flow can not only help you build a nice little nest egg in addition to what you may receive from your current salary, but also give you an income stream and a bit of job security if you were ever to lose your job. So, when you do find yourself with a bit of extra cash, one common question is, “What do I do with it now?”
The reality is: there isn’t a one-size-fits-all answer. But there are plenty of money-savvy ideas for saving or investing your side hustle income that will pay off in the short and long term. If you are struggling to decide where to put your extra cash, check out these 5 useful ways to put that extra money to work toward achieving greater financial independence.
1. Pay down your debt
If you carry a balance on a credit card or have a high interest loan, one of the smartest financial things you can do is pay off the debt. It’s not the most glamorous or even exciting option, but if you’ve got extra money to invest, then you might as well put it to use saving yourself money in the future. Once you’ve paid off a balance, you’ll be in a better position to invest even more available funds or pay off the next high-interest debt you’re carrying.
Do the math and see what makes the most sense. Chances are, what you’re paying in interest on a loan or credit card is higher than what you could hope to earn in the stock market or with a savings account.
2. Give your emergency fund a boost
Life is full of surprises. Sometimes those surprises are pleasant adventures, and other times they are massive disruptions that can easily throw your daily routine (and pocketbook) into chaos. In fact, experts say that nearly 44% of Americans aren’t prepared to cover an unexpected $1,000 expense. With so many people teetering in the delicate financial balance, what’s the solution? The answer: an emergency savings fund.
Basically, an emergency fund is money you set aside for an unforeseen event, like a job loss, a medical issue, a surprise home repair or an auto breakdown. After all, no one plans for the water heater to go out. The standard practice is to have 3-6 months of living expenses tucked away so that when you need money quickly, you have it. It’s also advised to keep your emergency fund in an accessible savings account (or sub-account) for your convenience — ideally in an account that will earn you interest along the way.
3. Open an interest-bearing savings account
A great option for growing your money is simply to save, save, save. While checking accounts are a great option for holding and accessing your money for daily needs, they don’t typically pay you anything in return. On the other hand, savings accounts not only give you another place to put your money, but also the chance to make money with your money in the form of interest.
Whether you’re interested in a simple personal savings account or something a little more advanced, like a money market account or an IRA money market account or a fixed interest rate certificate of deposit, there are plenty of interest-earning savings options to choose from. As always, it’s always important to do a little homework and find a savings account option that best fits your specific needs and savings goals.
4. Increase retirement contributions
Chances are you’ve asked yourself, “How much should I save for retirement?” It’s the million-dollar question. Most experts recommend saving at least 10-15% of your pretax income.
With so many unknowns in the equation — including life expectancy, lifestyle preferences, spending habits and economy fluctuations — planning for your retirement might feel a little like looking through a tinted window. But there are a few things you can consider. If your employer offers a 401(k) and matching contributions, then your first action should be to contribute the amount your employer will match, if not the total yearly allowable contribution. Another option is to visit with a financial planner, such as a Zions Bank Wealth advisor.
5. Start a home renovation fund
Homes are one of the biggest purchases (and investments) a person can make. So, if upgrading your home investment has the potential for a good return, then putting money toward a fund to fuel your upgrade projects makes good financial sense, too.
The trick is to set up a savings account for your home renovation fund that is separate from your other bank accounts. That way the money is liquid whenever you’re ready to tackle a project, but also safely partitioned from your other daily spending accounts so it can be left to grow. With that in mind, be sure to find a savings account option that offers the highest interest rate possible, while also meeting your accessibility needs. There’s nothing wrong with boosting your renovation dollars while you save.
We’re here for you — no matter where the road takes you.
Zions Bank is here for you with numerous tools and services to help you improve your financial situation at every stage of life. Our branch teams are ready to answer any questions or support you in any way you need by phone, online or in person. Visit a local Zions Bank branch to speak with a banker today.
