This post was suggested by a friend who is maximizing his income using Airbnb. In his words, “I’m getting an extra paycheck per month renting my room on Airbnb.” This is great! He is getting creative to generate extra income. There has also been some controversy about the legalities of Airbnb and he is in a location that has been cooperative with that start up. Extra income is appealing, and new technology offers a number of ways to generate it. Once you’ve earned it we want to be sure capture it in meaningful way. Let’s examine these concepts in more detail…
There are a number of start ups that allow you to leverage the shared economy or your human capital to generate more income. In addition to Airbnb there’s, TaskRabbit, FlightCar, and DogVaycay. Of course, this is in addition to more traditional ways like garage sales, consignment for cloths or luxury accessories or second jobs. Each has its tradeoffs as far as time and commitment, as well as upsides and risks. Not everyone is comfortable renting out their car (as you do with FlightCar). However, for someone with a 10 year old volvo (I’m talking about me here), it is worth the free car wash, airport parking and cut of the rental.
Our default as humans is generally to spend what we make. I’ve seen this happen with incomes in six figures and far less. We tend to spend what we make unless we put savings strategies in place. Start off by making savings automatic. Have money transferred to savings and retirement accounts when each paycheck is received. This way you aren’t tempted to spend those funds because you see them in your checking account. You have the peace of mind knowing that your extra efforts to create income are working for you.
When prioritizing savings, start with an emergency fund. I mention this so frequently but that is because it is critical. Having six months of expenses set aside in an account you don’t touch can really help. Balance this with paying off debt. Then set some money aside for anticipated expenses. This might be an upcoming vacation or an insurance premium. As you accumulate savings for these things (it can take a while so be patient and stick with it) make a wish list for items you want to spend money on. Then create goals for larger items such as retirement. Savings amounts don’t have to be large lump sums (although that is great too). Start with small consistent amounts each paycheck or each month. Then increase amounts to retirement accounts every time you receive a bonus, raise or any extra income.
Create additional income and make sure to automate savings and get think ahead about what is meaningful to you so that you can SaveUp!
This post was written by SaveUp’s personal finance contributing writer, Catherine Hawley, CFP®.