Side gigs have become a significant part of the American economy over the past decade. According to NBC News, 36% of Americans have a side gig, earning an average of $891 per month. This extra income can make a big difference, but it’s essential to manage it wisely to avoid overspending.
One smart move is to open a high-yield savings account. If you don’t need your side gig money for immediate expenses, parking it in a high-yield savings account can earn you 4% to 5% interest. Regular savings accounts don’t offer much interest, so your money loses value over time due to inflation. A high-yield savings account helps your money grow while you decide your next steps.
If you have high-interest debt, paying it down should be a priority. High-interest debt, like credit card debt, can drag down your financial progress. Credit card companies often charge high interest rates and hide rate hikes in the fine print. Once your debt is paid off, you can start using your extra income to build wealth or invest in yourself.
Investing in new skills is another excellent use of side gig income. Learning to sell, mastering digital marketing, or improving your writing skills can boost your earning potential. Depending on your current job or side gig, there might be certifications or courses that can help you earn more.
Consider increasing your contributions to tax-advantaged retirement accounts or other investment accounts. If you haven’t reached your contribution limits for the year, adding more can yield better returns than many other savings options.
Starting or increasing an emergency fund is crucial. An emergency fund should cover three to six months’ worth of income and be kept in a high-yield savings or money market account. If you haven’t set one up yet, your side gig income can be the perfect source for this fund.
Improving your home can also be a wise investment. Even small upgrades can increase your home’s value if you plan to sell it eventually. Energy-efficient improvements, like replacing old appliances or windows, can lower your utility costs over time.
Lastly, consider investing in the next generation. If you have kids or grandkids, opening a 529 account is a tax-free way to save for their education. If your child or grandchild doesn’t go to college, you can convert the plan to a Roth IRA, so the money isn’t wasted. There are some rules for rollovers, but it’s a flexible option to ensure your side gig income benefits your family in the long run.
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Managing side gig income wisely can turn extra cash into long-term financial security. By making smart financial moves, you can make the most of your earnings and build a more stable financial future.
