How to Use a Side Hustle to Improve Your Personal Finance Situation These three simple tips will help you use your side hustle as a way to improve your finances.
By Wendy Coop
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As many entrepreneurs have demonstrated, side hustles are a great way to make money in your spare time. While having a side hustle is a great way to increase your income and build multiple streams of income, your side hustle can also be used to improve your finances.
Here are three ways a side hustle can improve your personal financial situation.
1. Another stream of income
Gone are the days when income from a single source is sufficient to be financially stable. These days, it is becoming more common to diversify your income by having a side hustle, investments, passive income and more. Whether you sell digital products or offer your services, there is a benefit to having an additional stream from your side hustle.
Often, When going over financial information with people I find that they don't have a money management problem. Instead, they have an income problem. And that simply means they aren't even making enough money to cover things they want and need. Without a sufficient income, it's hard to think about anything other than basic survival needs. Additional income from a side hustle can provide much-needed breathing room in the budget and help you stop living from paycheck to paycheck.
Related: 44 Profitable Ideas to Make Extra Money on the Side
2. Increase your savings
Because you have another income source, you can use that income to boost your savings. Maybe you need to have that fully-funded emergency fund or maybe you and your family are looking forward to your next vacation. By using the side hustle income for your savings, you free the money up in your budget to do other things.
You want to make sure you have enough money in both your personal and business savings accounts so that you can take care of emergencies or irregular expenses (such as car maintenance and repair or taxes) with cash without putting yourself or your business further into debt. By making savings a habit from your side hustle income, you can create a buffer between you and your debt by funding an account to be able to pay for those unexpected expenses or irregular expenses.
Related article: 5 Reasons You Must Have a Side Hustle
3. Paying off debt
If you've got your savings strategy down, another great way to use your side hustle income is to pay off debt. Rather than spending the money on something your business doesn't need just yet, you can take the profit from your business and use it to pay off debt. To make this the most effective, use the debt snowball method to pay off your debt.
The debt snowball method is when you order your debts from smallest to largest balance and pay off the smallest amount first. Then you take the amount you were paying on the small debt and apply it to the next debt on the list. Since you've already budgeted for the payment, you won't miss it. As you pay off the previous debts, the amount you pay on each debt down the list grows larger and larger, like a snowball rolling down a hill, enabling you to pay off debt at a quicker pace.
Regardless of the reason you started your side hustle, remember the extra money is beneficial to your personal finances as well. This can come from simply having the extra money, adding to your savings or paying off debt. By utilizing your side income in these ways, you are setting yourself up for more financial success and stability as well as being able to craft the lifestyle you want to live.
