This post is sponsored by Lexington Law.
Side hustles and freelancing have become extremely common amongst twenty-somethings in today’s day and age. We’ve moved in the direction of a gig economy with freelancers taking various side projects and pay-for-a-one-time service kind of jobs. There are many reasons having a side hustle is worthwhile, but today, we really want to emphasize the reasons a second flow of income is so important.
Related:The Ultimate Guide To Making More Money
The average salary varies based on the location, of course, but to give you an idea, the average salary for those between the ages of 20-24 is $29,770 per year and the average salary for those between the ages of 25-34 is $41,951 per year. Between student loan debt rising, the cost of rent increasing, healthcare, insurance, and more, in many areas of the country, average salaries this low does not suffice.
That’s an obvious reason as to why you need a second flow of income. A very important one, for sure, but there are also some other important reasons as to why you need a second flow of income, too. Many people struggle to cover their basic bills, not to mention having the chance to save or invest.
Living in such a financial precarious state can be incredibly stressful. It can be emotionally and physically exhausting to constantly worry about bills, unexpected expenses, and debt. It can also be even more challenging if you job doesn’t offer any of these stress-reducing benefits.
Saving money helps reduce your financial burdens. It can also help you improve your credit. If you are already feeling financial stress, improving your credit is just one way to work towards ensuring a better financial future for yourself.
I recommend starting by checking your credit reports. If you have inaccuracies or unsubstantiated claims on your credit report, reach out to the leaders in credit repair – Lexington Law. They are so generously offering free consultations to help you improve your credit and your financial life. Get in touch and set up a call here.
Why You Need A Second Flow of Income
1. Just in case you lose your job.
No one ever wants to think about the possibility of losing their job. But unfortunately, it can happen to anyone. And it is usually out of our control.
Between companies downsizing, shutting down, budget cuts or turning more and more to freelancers rather than full-time workers, the possibility of losing your job is out there. It is important to plan for it and to save for it.
By having a second (or third or fourth) stream of income, you are guaranteeing that if you lose your job, you will still have money coming in that can help with your rent, mortgage, loans, or any other bills.
Additionally, by having another stream of income, while you have your current job, you likely have the ability to have a bit more. By saving money, you have more of a cushion if that unfortunate event happens and you do lose your job. As much as we do not want to dip into our savings, sometimes it is necessary and in the case of losing a job, is is necessary.
Having an emergency fund to prevent you from having to dip into an emergency line of credit can be a financial saving grace if you do lose your job.
Related: Building Your Emergency Fund & Preparing For Your Financial Future
2. If unexpected expenses pop up.
Life is expensive. Being an adult is expensive. I know that whenever I think I am going to have a low-cost month, something comes up, whether that be a new car expense, a new medical expense, a gift I need to purchase… the list goes on.
If your full-time salary just covers your rent/mortgage and your usual monthly bills, an expected expense of any size can be a burden to pay off.
By having a second flow of income, you have the extra funds that can pay for it. You know that you have enough money to cover your usual bills and do have the money to cover this unexpected expense. You do not have to fret about it as much as you potentially would have if you did not have this excess flow of money.
Similarly to above, having a second flow of income can benefit you from having to turn to a credit card or payday loan to see you through.
3. Investing for your future.
Does your full-time job offer a 401(k) but you had to limit how much money you are putting in there because you cannot afford for a large amount to be taken out of your salary each month? Have you wanted to invest in the stock market but do not have the excess funds to do so? Think of your second stream of income as that opportunity.
This extra money, assuming you do not need it to help you cover your monthly bills, can be your money to invest. You don’t need thousands of dollars to begin investing, but the early you can start socking money away into your investments, the better.
If you are not sure how to begin investing, here is a beginner’s guide for you to try. Remember, investing, especially into a 401(k), is an investment in your future.
4. That *extra* splurge.
We all know we *should* make coffee at home or at the office and not buy it, but…. most of us fail when it comes to that. I am guilty, especially when it is prime iced coffee season.
By having other streams of income coming in, I do not feel guilty about this purchase. I actually call one of my freelance gigs my “coffee fund” as it’s one of my lower paying gigs but it covers the cost of my monthly coffee (and then some!).
Whether your guilty pleasure is coffee, eating lunch out by a place near work, a clothing item you have had your eye on, or something else, one of your other income streams can be what you use to cover this, so you do not have to worry about this coming out of your main salary.
How A Second Flow Of Income Improves Your Finances
If you lose your job and main source of income, for example, you might have to dip into an emergency line of credit if you don’t have an emergency fund. This can quickly rack up debt, throw off your credit utilization ratio — and if you’re not careful, you might miss credit card payments — which can have terrible implications on your credit. A second flow of income can help prevent this from happening.
You can start saving the money from your second flow of income or use it to pay off debt. Both things have positive implications for your credit and for your future!
Related: Credit Repair: Why It Matters With Lexington Law
Everyone’s situation is different but we all have one thing in common — we can all benefit from having a second stream of income coming in just in case the unexpected worst case scenario happens.
This is especially important if you are a single income household. You want to be able to have money coming in at all times, even if it’s not the high amount you are used to, at least something is coming in to help you. It is good planning, good saving, and a good investment in yourself.
And remember, if you do have questions about your credit, reach out to the credit repair consultants at Lexington Law.
About the Author
Michelle graduated from Fordham University with a Bachelors of Arts '13 and a Master of Arts '14. She's currently working in corporate America with a side of freelance writing. She wants you to learn from her experiences and mistakes so your 20s can be your best decade. When she's not working, she's likely planning her escape to a tropical island.