A lot of people need to make supplementary income because they have loans, bills and other expenses piling up. The good news is that it’s easier than ever to earn extra money and get the peace of mind you need. There are a few different ways to do this, including: writing a book, driving for ride-hailing apps or renting out a spare room in your home.
1. Paying Off Debt
Whether you’re a full-time employee or have a side gig, earning supplemental income is a great way to reach your financial goals. However, be sure to understand the tax implications for any extra money you earn.
For example, bonuses or overtime pay may be taxed differently than your regular paycheck. And gig work such as driving or teaching is usually considered self-employed income, meaning you’ll receive tax forms and have to track your taxable earnings.
Earmark any additional income you make to go toward paying off debt, starting with your highest interest rate debt first. If necessary, cut back on expenses to allocate more disposable income to your debt payments by www.extracasheachmonth.com.
2. Saving for the Future
Saving money is one of the most important things you can do for yourself. It can help you break out of the paycheck-to-paycheck cycle, and it can also allow you to make a big purchase down the road, like a car or vacation.
When it comes to saving, it’s crucial to start early. The earlier you begin, the easier it will be to reach your goal.
To get started, figure out why you want to save for the future. This will help you stay focused and motivated. It may even help you get more specific about your goals.
3. Paying for Unexpected Expenses
Whether it’s an emergency medical expense, home repairs or school costs, unexpected expenses can throw your budget off track. Unless you have an emergency savings account, these costs can be financially devastating.
Supplemental income may include bonuses, overtime pay, commissions, wages paid under reimbursement or other expense allowance arrangements, and nonqualified deferred compensation. These types of income are typically taxed separately from regular salary, and withholding rules differ from those that apply to regular wages.
Side gigs like food or grocery delivery, babysitting, pet sitting and house cleaning can also provide supplemental income. Just be sure to follow the appropriate tax guidelines for these payments.
4. Getting a Mortgage
Student loans, credit card debt, and medical bills can pile up quickly. Getting a second job or making additional income from side gigs can help pay off debt and reduce financial stress.
Employees can get supplemental wages from their employer, such as bonuses, overtime pay, or commissions, or they can earn them through a side job, such as driving for Uber. The IRS taxes supplemental wages differently depending on whether they are combined with regular paychecks or paid as a separate payment.
Leapsome’s compensation insights and planning tools can help you understand how supplemental income works and when to use it. Check out our guide to supplemental income to learn more.
5. Paying for College Tuition
Paying for college can be costly. Tuition fees, course materials and housing are all expenses to consider. Fortunately, there are ways to reduce these costs and make them more affordable.
One option is to apply for a state grant or scholarships. Another is to look into studying abroad, which could save on tuition and living costs. Finally, students can cut costs by shopping for the cheapest college options or by living with family or at home to avoid room and board charges.
It’s also important to limit borrowing to help lower the overall cost of education. Relying on loans can impact future financial goals and should be weighed carefully.
6. Getting Ready for Holiday Expenses
With holiday shopping, family meals, and travel plans on the horizon, it’s a good idea to have a spending plan in place. Budgeting for these expenses can help ensure that your holidays are stress-free and enjoyable.
The IRS defines supplemental income as “payments made in addition to regular wages” such as bonuses and severance packages, and retroactive pay increases. Stipends, vacation pay, and unused sick leave do not qualify as supplemental income, but they may be subject to withholding tax in the same way as regular wages.
Earning supplemental income can be done either inside or outside the workplace, but both options have benefits. Make sure to understand how each source of supplemental income works so you can maximize your earnings.
7. Getting a Second Job
Many people find that they need a second job to help them pay off debt, save for a vacation or a new car and reach their financial goals faster. Additionally, a side job can be a great way to explore a passion or gain experience in a field before making a full-time career change.
Once a tactic reserved for underemployed workers and cash-strapped professionals, moonlighting is becoming increasingly common among working adults of all ages and income levels. However, it’s important to consider the cost and impact of a second job before you make the commitment.