Michelle has been doing an amazing job with extra income lately. Her blog has been taking off and that's helping her make a ton of side income every month. Due to this, she's been getting a boat load of emails about blogging for side income and has even written a few great posts about how to make money blogging. Hopefully her readers have benefitted from her tips and are starting to make money at their own blogs.
One thing she hasn't covered is what to do with all of that extra income. One of my favorite things about extra income is that it's not included in the budget, so you can really do anything you want with it. That said, it might not be the best idea to blow it on shopping. So what should you do with your extra income?
Use Your Side Hustle Income to Pay Off Debt
This is probably my number one suggestion for extra income. I make a bit of cash every month through staff writing and my own blog, My Alternate Life. Up until a few days ago, I've thrown everything I've earned at my debt. This has been a huge boon to me because it's shortened my debt pay off window. When I first started trying to pay off the $38,000 of debt I'd accumulated through school, my best calculations had me debt free in five years.
Now it looks like I'll be debt free before my the two year anniversary of Operation Pay Off Debt. This is partly due to me putting all of my extra income towards my debt. Michelle is employing the same strategy to pay off her $38,000 in student loans, and she's managing to get rid of them amazingly quickly.
Use Your Extra Income to Build Up an Emergency Fund
Using extra income to build an emergency fund and insurance is a great way to use your side hustle to make yourself more secure. While most experts suggest that an emergency fund consisting of 3-6 months of expenses is ideal, very few people actually have this on hand (including me, until I get my debt paid off). Using extra income to fund your emergency fund is a great way to beef it up without having to re-balance your budget.
Take Your Extra Income and Start a “Fun” Fund
This is one of my eventual goals with my emergency fund. Once my debt is paid off, and my emergency fund is fully funded, I plan on shoveling everything I make in side income into a “Fun” Fund. I'll probably use it for travel and furnishing our 400 sq. ft. house properly. I can't wait! The best thing about this is that I can have lots of fun without interfering with my other goals, like saving for a house and funding my retirement.
Side Income is Dead Useful
Side income is a great way to achieve your goals faster than you thought possible. My side income has helped me pay off a crazy amount of debt in a very short period of time, which has kept me motivated and interested in those goals. Your side income could work the same wonders in your financial situation, if you're smart about how you spend it.
What do you do with your side income?
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I started ramping up my side income efforts again over the summer once I decided to commit to travelling in 2013 – so all of that has been channeled right into the travel fund 🙂
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Sounds nice, can't wait until I can do that!
Whatever extra income I get goes straight to my investment account.
That's a good idea, do you have specific goals with those investments or is it just a general account?
Currently 100% is used to pay off debt. Once that's done, I'm using it to help fund our long-term goals. Eventually though, I'd like to invest 90% in other business ideas and spend 10% on fun.
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Interesting idea to use it to invest in other business ideas, I never thought of that!
I don't have any income from this, yet! My books (I was a novelist) are still bringing in foreign royalties now and again, and my first products will be out next month on my Frugal Guru site, but I'm in a loooong dry spell. 🙁
My money goes first to retirement, then it's split between remodeling/fun stuff and paying down the mortgage.
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Good luck getting back your side income!
Where I put my side cash depends on my current financial goals. I used to put everything on my debt, then it was savings and now it’s my mortgage. I’m not sure what’s next but I hope it’s something fun like travel. 😀
I think I would be tempted to put a lot of mine onto my mortgage once I have one, so I'm going to try and stay mortgage free for as long as possible.
We are using our side income to help pay off our mortgage!!! We paid an additional $8700 a few weeks ago and it felt crazy because that was the first time that we had ever touched any blog money.
Thats great I wonder how many years you took off the term?
That's a crazy amount of money to put on your mortgage! Great job!
We're using our side income for a number of different things, investing and for stuff we need done around the house.
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We're still trying to figure that out. http://nicoleandmaggie.wordpress.com/2013/04/01/a…
It would be easy if we had just one goal, or if our goals were smaller, or if we had a lot more income! (Or if we had any debt other than our mortgage.)
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Ahh wouldn't life be so much simpler if we just had more income? 🙂
I think side income is a great way of paying down debt, but also adding to a house downpayment savings. I guess it depends on where people are in life, and what their goals are.
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Oh definitely, and it'll probably be very tempting to use my side income to help save for a down payment on a house, once my debt is paid off.
It's just going into savings for now, but as it (hopefully) increases I'll have to make more decisions!
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Are you saving towards anything in particular?
My extra income is going towards 2 things right now. My upcoming cross country trip in July and also my debt snow ball plan.
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Those are great things to put your debt towards!
The best thing to do with side income is invest it. In life you get an income from only two possible things:
– your work
– your investments
At some point we all want to (or have to) transition from the first to the second source of income. In order to do that, we have no choice but to invest. Many people are reluctant to invest, because they feel intimidated by the notion and the risks.
The bad news is investing is inevitable — you may as well accept it. The good news is it's not rocket science, millions do it every day, and you can learn before you have the side income you have to figure out what to do with.
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I definitely think that investing is an inevitable part of life, but I would rather pay off my debt first – not for logical reasons, but for my own peace of mind.
I completely agree with you on side income and its usage. The problem for me is the lack there of. Hopefully we get the debt down a little more and I will definitely be looking into something.
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Michelle has some great posts about how to make money online, a good place to start if you want to get into a side hustle.
My wife and I do they same thing you do with our side income. It's amazing how a little extra cash that wasn't in your budget can drastically reduce the amount of time it takes to get out of debt. Our plan is similar to yours. We originally thought it would take 4.5 years to get out of debt (being aggressive), but we're about to complete it in around 2 years mostly because of the side income we earned. I hope to get to the point where I can evenutally put it into a "fun" fund as well, but for now we'll keep paying off the debt.
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Wow congrats on making such amazing progress on your debt!
Since my income is so unpredictable as a freelancer, I fold any extra money into my bank account as if it were more freelance money. I don't treat it any different. But now that my cc is paid off and I have no more debt, a lot more has been going to the emergency fun, and I'm going to start car and pet funds as well. And hopefully continue to grow my vacation fund and contribute to retirement. That's if the summer months for work are better than they have been in the past.
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I think that's a great idea. As a freelancer, you must have a much bigger emergency fund than most people.
I think another option is to create an opportunity fund for potential opportunities that you may not have on your radar. Ever looked at a stock, thought it would go big, but didn't have any money to invest, and of course it did exactly what you thought? Sometimes having a fund for opportunities that may not be direct goals is a nice thing to have if you have the flexibility.
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That's a great idea, that's part of the reason I want to get out of debt in the first place – in order to be more flexible and not so constrained by responsibilities.
Right now my side income is funding a very expensive sewer drain-out repair. Not the funnest way to spend your hard-earned side income :/ Having side income and seeing how it has benefited me has really motivated me to keep at it, though, even if it isn't always fun to work on stuff on nights/weekends.
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Aww that's not so fun, but it's great that you can use your side income instead of dipping into an emergency fund or line of credit.
Well… right now I have earned just enough for a candy bar in my first month, but I have big plans.
The smart side of me says that I will pay off as much of my debt as possible..
While the other side of me says that I should party with hookers in Vegas.
I think I will save my marriage and go with the debt thing.
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That's probably a good strategy!
The obvious choice is to pay down debt when you have it, but one thing that we all should do to avoid losing focus is to have a little play money fund, for example 5% – 10% of all income should be allocated to whatever floats your boat.
That's a great idea. For the next few months, I'm splitting my side income 50/50 towards debt and fun, because all work and no play leads to a spending binge for me.
It just goes into the general pool for us. We'll invest what's left over.
If we have consumer debt, I would use the extra money to pay it down.
Great job with the xtra income.
I invest my side income! I have always saved and invested any additional income. When I received promotions or salary increases, I always invested half of the money.
A bit of fun money and a bit of investment to improve the blog and maybe other investments soon.
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Originally I used my side income to pay off debt and fund my emergency fund. Now that I am done with those goals I am saving it up for our next adoption!
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Great post! There are SO many posts out there about how to make extra money but not many about what to do with it! 🙂
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For me, it would depend on where the money came from. Internet money went directly toward debt-of-highest-concern. Part-time consulting job money went toward travel. Now, it's all going to savings so that buying a condo doesn't hurt so much!
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We'll be using it to pay off debt 🙂
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Wow, with extra income I'd like to put it in a new business or opportunities. I'm working on the extra income part 🙂
Extra income always goes to savings and investments. But from time to time, I treat myself and my family for an out of town, or go out and eat dinner and watch movies.
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Great post Jordann, I actually saved almost all of my extra money from my web business and used it to put a down payment on building a new house, and I think without it I would have never been able to build a house. Now that my house is build I'm looking to pay down my remaining debts and build a nice emergency fund up.
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