Frugality is a great place to start when it comes to personal finance, but it can only take you so far. Eventually you have to start thinking about how to increase your income. One approach is to land a raise or a promotion, but there are also ways to supplement income. Today, we’re going to look at five.
House hacking is a simple idea: what if you treated your primary residence as an investment property?
If you have space to rent out or the ability to have a roommate, you can greatly offset your biggest expense (housing) with supplemental income in the form of rent.
You can use this extra income to pay down your mortgage faster if you own your home, but there are many other things you could do with it as well:
- Save it up to purchase another rental property
- Put it in an emergency fund
- Invest it in the stock market
What’s interesting about house hacking is that it straddles the boundary between frugality and income generation. On the one hand, you could count it as a creative Big Win, effectively offsetting your largest expense. But you could also consider it supplemental income.
One great way to supplement your income is to find freelancing clients.
Freelancing just means that instead of working for a company as an employee, you do gigs for them as a contractor.
The great thing about freelancing is that how much you work is flexible, there’s freedom to take on a lot of work or a little work as needed. You have the ability to control your own schedule.
The bad part about freelancing is that you need to find clients. Life gets easier once you’ve found a few good clients. You can get repeat gigs with those same clients and they can potentially refer you to new clients.
But getting your first few clients is a pain in the butt.
I’ve landed a few freelance writing gigs and the key was creating a portfolio of writing that I published on Medium. I would go to the problogger job board to scout potential gigs and then apply by linking to my most successful articles on Medium.
And of course, freelancing isn’t just for writers. There’s room for freelancing in just about any skill. One form that freelancing often takes is coaching or consulting, which can be specialized to nearly anything you’re good at.
One of the oldest business models is arbitrage: buying low and selling high.
In a world where people are buying things online, there are plenty of opportunities to do this.
One approach is to find things that are cheaper on one platform than another, and to buy them on the cheap platform and sell them on the one that commands a premium:
- Buy on eBay and sell on Amazon
- Buy on Craig’s List and sell on Facebook Marketplace
- Source from garage sales and sell on eBay
You can also eek out profits by doing a better job selling an item than someone else. Maybe their picture stinks. Maybe they wrote a bad description so that customers can’t find their listing. You can buy the item and position it better to sell.
Flipping is essentially the art of diverting goods towards the buyers that are willing to pay the most (or are too lazy to shop around for a deal)
The Second Job
This is the classic way to earn extra income.
Go to your day job from 9-5, then in the evening go to work for your second employer.
If you really need the money, this is still a viable option, but it’s not a fund way to go about life. Your time is valuable, and trading so much of the day away is a high cost to bear. Yes, all of the strategies mentioned today cost time, but being “on the clock” is the most oppressive form of trading your time.
The nice thing about this approach is that it can be fairly stable and predictable. With flipping or freelancing, it can be really hard to know how much money you will make from month to month. Getting a second job gives you a really good idea how much extra cash you’re going to haul in over a given time period.
Creating Digital Assets
This one is the slow play.
If you need to start generating supplemental income immediately, this is almost certainly not going to be a valid option. But if you have the luxury of being able to wait, this strategy can be more powerful than any of the ones currently listed.
The idea is to create something that works around the clock to earn you money. It could be a website, a YouTube channel, a podcast, a digital product. The key is that once it’s online, generating income isn’t dependent on ongoing effort.
I’m still making money off of YouTube videos that I published in 2016. I haven’t uploaded a video to YouTube in forever. But the videos are there, waiting to be found by the right people.
It’s the same with this blog. This post is going to be published in September of 2021, but there’s a good chance that you won’t be reading it until much later. The work is finished for me, but the benefits keep accruing. If there’s ads on this site by the time you’re reading this, I’m getting paid for work that I completed months or years ago.
One thing that I’ve learned the hard way from experience is that creating digital assets that really become popular takes a lot of effort over time. My weakness has been quitting before the benefits really have time to accrue.
That’s why I’m sticking with this blog. Right now I have 115 posts published. A blog with 115 posts is way more valuable than one with 15, both to the reader and the owner. I’m going to keep building this site out until it’s too good to be ignored.
Unless you have a head start, this is absolutely not the way to go if you need to make $2,000 fast, but it has the potential to turn into a juggernaut in the long term. You just have to have the patience to stick with it.
There are a lot of ways to supplement your income. It’s okay if you don’t know which one is the best option. You can dabble around and see if you can make any of them work for your circumstances. If one seems better than the others, you can divert all your focus to the most profitable option.
The key is to get started. You won’t making money by thinking about flipping, you’ll make money buy buying something and reselling it.
The first step is the courage to get started.