Even if you’re happy and believe that your job will be around for a while, there are good reasons to have multiple income sources. Having a different source of income supports peace of mind.
A second income source supplements your full-time salary. It can be anything from a part-time job to a side business–and the purpose of this income source is simple: prepare for financial roadblocks or reach financial goals sooner.
There is a difference between income sources and income streams. For example, two-income sources may mean you have a full-time job and a side hustle where you still exchange your time for money (i.e. driving others).
On the other hand, streams are varied that includes income from wages, interest, dividends, capital gains, profits, royalties, and rentals.
You can drum up extra income by choosing a side hustle in the marketplace but continue reading below for reasons to have multiple income sources.
There’s no such thing as true job security. Your company may do well today, but things can change in the next month or years. And if you lose your job, money from unemployment benefits may not provide enough cash to cover your monthly expenses.
With a second income source, you’ll be better prepared to survive a layoff or job loss. Between your severance, unemployment checks, and a secondary income source, you might be able to keep your head above water until you find another full-time position.
Build your emergency fund
Financial experts recommend a 3-6-month emergency fund. But unfortunately, if you’re living paycheck to paycheck, building your cash reserve can prove challenging. This is where a second income source comes in handy. Income from your day job can pay everyday expenses, such as housing, transportation, and utilities, and income from your second income source can build your savings account.
Start an emergency fund with your current financial institution. Change the title to reflect the Emergency Fund and Peace of Mind. Consider opening a savings account with another institution if you feel tempted to dip into the funds for discretionary spending.
Pay off debt
Whether you have student loan debt or credit card debt, your income from work may not be enough to pay down these balances. As a result, you might get stuck in a minimum payment trap. However, if you start a side hustle or seek part-time work a few days each week, the extra money can go toward paying down your debt, which ultimately frees up your money and improves your credit score.
Have a debt repayment strategy to help you pay off debt faster. Consolidate your credit card debt into one loan and refinance your student loans to save money and shorten debt repayment.
Ability to make ends meet
Even if you work hard and keep your life simple, your income may not keep up with inflation and the higher cost of living. And if you’re in a financial hole each month, you probably have little cash for extras.
Having multiple income sources can stop this vicious cycle and increase your disposable income. And with more cash coming in each month, it’ll be easier to cover your monthly expenses, which might reduce some of your financial worries.
Go through the budgeting process to get a better picture of your current financial situation. Through the process, you can determine your cash flow–the money in and out within a month. After completing the process, use budget apps to keep you on track and monitor your progress with less effort. Find the best budgeting app to help you.
Acquiring a secondary income source can build your savings, pay off debt or help cover your expenses — but these aren’t the only benefits. Exploring different income sources can help you discover your true passions. You may enjoy your side hustles more than your full-time job; and as you slowly increase the income earned from your secondary income source, you might be able to quit your full-time job one day and earn a living doing what you love.
You don’t have to leave your primary job, you can start a side hustle while still employed.
Learn how you can benefit from multiple income sources. Start with a side hustle and then learn how to create multiple income streams.