Adding Income

If you've reduced your expenses as much as you can and still have trouble finding the money to reach your financial goals, consider temporarily or permanently adding to your income and putting that money toward your debts or into savings.

Recognizing What Additional Work Can Mean for You

Extra work can be both a blessing and a curse. Extra income can help you pay off nagging debts that you just can't seem to get anywhere with any other way. Working a second job can also help you build new skills that could lead to a different full-time job or a new business of your own.

And nearly anyone can put up with a crazy schedule for a few weeks or even a couple of months, especially if you know exactly when the long hours will end and can count down the days — and add up your extra income.

But managing a heavy workload isn't easy. You have to juggle your responsibilities at home, your relationships with the people who are important to you, and your need for rest and relaxation with your new requirements on the job.

Before trading in your time for money, be sure you can't cut back on your expenses enough to gain the extra money you need. Consider adding income only as a last resort.
The following sections help you define the pluses and minuses of additional work, and give you some tips for smoothing the rough road ahead.

New Skills That May Lead to Different Work

One approach to choosing your second job is to look for one that builds your skills in a way that will help further your career. Suppose, for example, that you don't have any computer skills at all. You see an advertisement for a job that requires 15 hours of work each week at your local library reshelving books.

But you also know that the library's checkout system is completely computerized, so at your interview, you ask whether you would be able to spend a few hours a week learning the system and, at some point, helping patrons use the system, too.

Within just a few months, you may develop enough computer skills to be able to update your resume and apply for a completely different day job — one that requires a basic knowledge of computers — with your current employer or with a new one.

A Foundation for Starting Your Own Company

If you're hoping to go into business for yourself and want extra income to pay off debts before you start the company, or as a cushion against uncertain income, you can start your business on a very part-time basis — perhaps on evenings and weekends — and build both a client base and a reputation before you go into the business full time.

Suppose, for example, you're thinking of starting a landscaping company. Using the additional evening daylight hours in the summer months, you could begin your landscaping business during evenings and weekends. Let your coworkers, friends, and neighbors know about your new business, and let word spread about your great product or service. As your business picks up, you can begin to cut down your hours at your other job or quit that job altogether.

If your new business will compete with the company you work for, take extra care. Don't advertise at work and be sure never to use your company's equipment or ideas for your own business. And never work for yourself when you're on company time.
Besides landscaping, some business ideas that might lend themselves to evenings and weekends include catering, photography, graphic design, Web site design, furniture refinishing and repair, selling antiques, home remodeling and repair, closet and room organizing, dog training, tutoring, selling cosmetics, and so on.

Far Less Available Time

The hours you spend working more will have to come from somewhere. Unless you have hours and hours of unfilled free time right now, your additional work is probably going to keep you from spending time with your family, running errands, exercising, futzing with your house or car, visiting friends and extended family, taking a vacation, working on your hobby, reading, playing with your pets, and so on.

This isn't trivial — remember the saying, “All work and no play makes Jack a dull boy”? Working too much can dull your senses, making life seem as though it revolves around work, when, in fact, a healthy life revolves around the people and events that make you happy.

Always include your family in your plans to work additional hours. Not only will they miss spending time with you, they'll probably also be asked to pick up some of your chores around the house, so they deserve to be included from the start.
If you're planning to add extra income for a short time — say, until your $6,500 credit card debt is paid off — you can plan ahead with friends and family, agreeing, perhaps, that they'll help you by running some of your errands while you're working to pay off this debt. You may also be able to agree that as soon as the debt is paid off, you'll quit earning the extra income and immediately spend more time with them, maybe even by taking a well-deserved vacation.

Although the thought of extending your extra income indefinitely may seem like a wise financial choice, keep in mind that life isn't all about work — if you do nothing but work and make money, you'll be likely to either lose the valuable parts of your life or burn out on your existing jobs and begin to dread them.

If you're planning to add extra income for a longer time — perhaps taking on a higher-paying job that requires far more working hours — try to find ways to gain back some of your free time. Move closer to work, hire someone to help with errands and chores, exercise or meet with friends before work or during your lunch hour, listen to books on tape while you drive, take fun vacations, and so on. Then when you are home, be fully in the moment, not working, thinking about work, or preparing for the next day of work.

If you're adding work temporarily — for a few weeks or months — you can probably survive this additional stress without damaging your health or relationships. But if you plan to continue to work a lot, find ways to reduce stress and continue to connect with those around you.
Added Stress

Working too much taxes you physically and emotionally, and that can make you fatigued, subject to illness and injury, and irritable, none of which makes you a very good companion, parent, or friend.

In addition, if your work is highly mental in nature, you may suffer mental stress that can rob you of your ability to converse intelligently and work on detailed hobbies or other projects during your down time.

Higher Taxes

Ben Franklin said that “a penny saved is a penny earned.” Technically, though, he should have said that a penny saved is about 1.20 cents earned, because taxes can eat up that much (or more) of your earnings. If, on your current income, you can find a way to cut $10 from your expenses, you'll have $10 more to put toward paying off debt, into savings, into your retirement account, and so on. But if you work more, you'll have to earn between $12.50 and $13.25, which will get you about $10 after taxes, to pay off $10 from your debt or add it to your savings account.

Because of taxes, it's always more efficient to make the same income — or even to make less income — and cut your expenses than it is to add more income. Using a tax calculator, fill out WORKSHEET 11-1 to see just how taxes take a bite out of your extra income.

WORKSHEET 11-1

Does Extra Income Equal Extra Taxes?

Income

Total Taxes Due

Current

$

+ $500

$

+ $1,000

$

+ $2,000

$

+ $3,000

$

+ $5,000

$

+ $10,000

$

+ $15,000

$

+ $20,000

$

+ $25,000

$

+ $30,000

$

Changing Jobs
One of the simplest ways to increase your income is to look for a new full-time job. In fact, many job counselors advise their clients to look for new work every few years as a way to boost their income (and increase their contacts within the industry).

If you receive a 3–5 percent raise every year at your current job, you'll have to work about two to three and a half years before your income goes up by 10 percent. But you may be able to get a 10 percent raise next month by getting a job at another company.

If you do change jobs, however, be sure the new job — with its higher income — doesn't end up costing you more. It could, if the new job is ten miles farther away, requires expensive clothing that must be dry-cleaned, doesn't offer free parking, requires that you carry a cell phone or laptop computer at your cost, and so on.

Before accepting a job offer, ask detailed questions about your new responsibilities and the costs that may be involved. If your new job is with your existing company, don't shy away from asking these same questions. Different departments within large corporations often require different dress codes and standard equipment.

Getting a Second Job
Getting a second job can help boost your income, and can be fun at the same time. To make it as enjoyable as possible, try to find work that suits your personality and interests.

If, for example, you have a great love of photography or athletics, consider getting a second job at a camera shop or at an athletics store or gym. If you tend to be outgoing, try to find work that allows you to interact with people. If you're shy, consider working behind the scenes at a company that interests you, instead of having to work with people. By matching your personality and interests to your second job, the extra work may not seem as difficult to endure.

One of the best times to find a second job in retail is during the holidays. Companies hire seasonal employees from the week of Thanksgiving through the New Year.

At that point, you're usually out of a second job, but if you've worked out well for the company and express interest in continuing to work for them, you may be called back for the next holiday season and at various times throughout the year.

Working Overtime
Unless you are a salaried employee who is expected to work as many hours as necessary to complete your work, you may have opportunities to work overtime at your current job to earn additional income.

One of the best perks of working overtime is that you're usually eligible to receive more pay per hour for hours over 40 per week — sometimes as much as time and a half or double time. That can add up to a lot of additional income in just a short amount of time.

Be aware of the overtime commitments that your company may require, however. Some companies expect you to commit to working overtime for a set period, even six months or a year, before they'll allow you to sign on.

And the time required may be open-ended, so that you're getting home at 6:30 P.M. one day and 8:00 P.M. the next. Before accepting this opportunity for additional income, be sure you're clear on exactly what's involved.

Freelancing for Your Own Company
Although freelancing is similar to working overtime because you're doing work outside of your normal working hours for the company you already work for, it's a little different.

In general, freelancing involves taking on a project that no one within the company has the time (or the expertise) to complete. It can involve projects from typing a handwritten manuscript or sewing a banner to creating a graphics-heavy company brochure or catering a company event. You work on the project in your spare time, usually on your own equipment at home.

Freelancing allows you to use your unique skills and talents to earn extra money.

Freelancing on a particular project doesn't lock you into working extra hours for an indefinite period of time.

Freelancing can improve your reputation with your current employer, especially if you're able to come through on a difficult or time-sensitive project.

Freelancing can spin off into a full-time gig if you're able to find more clients in addition to your current employer.


Starting a Small Business
Starting a small, home-based business is one of the hottest trends in the United States today, but it doesn't have to be a full-time investment if you don't want it to be.

If you're trying to find a way to earn extra cash but want some control over how and when you work, starting a small business from your home might be just what you're looking for.

The following sections help you answer some important questions about starting a part-time business. WORKSHEET 11-2 can help you determine whether earning extra money by starting a small business is right for you.

WORKSHEET 11-2

Business Expenses

Expense

One-Time Costs

Monthly Costs

$

$

$

$

$

$

$

$

$

$

$

$

$

$

TOTAL:

$

$

Finding the Best Small Business for You

The best small business for you is the one that you're enthusiastic and passionate about. This means that your business idea has to mesh with your skills, unique qualities, and personality.

If, for example, you're thinking about starting a catering business but don't really enjoy cooking, you probably won't succeed. If, on the other hand, you've always loved cosmetics and like dealing with people one-on-one, you might want to try your hand as a Mary Kay consultant or Arbonne representative.

Matching your work to your personality, qualities, and skills is the topic of hundreds of books. If you're unsure which business idea will work best for you, take a trip to your local bookstore or library and find one that offers self-tests and ideas about home-based businesses.

If you're planning to start your business part time to earn extra money, be sure you choose one that doesn't require a large commitment of time or a large investment of cash. Although you may turn your business into full-time work sometime in the future, you don't want to jeopardize your current job by taking on more than you can handle.
Determining Whether You're Passionate About Your Business Idea

Finding out whether you're passionate about a business idea is pretty simple — just decide whether you agree or disagree with this statement:

Now that I've come up with a potential business, the thought of not pursuing it seems impossible.

If you agree, you're plenty passionate. But if you disagree; that is, if you think your business concept is just okay or seems like too much work, don't bother pursuing it — you won't have the energy required to make it succeed.

Estimating Your Potential Income and Expenses

Estimating your potential income and expenses is always difficult. To keep the number realistic, come up with three scenarios for both income and expenses: Best case; average case; and worst case. If, for example, you think you can get three catering jobs per month, use that as your best case, but also figure out how much you'll make with just two catering jobs (average case) or one (worst case).

Do the same with your expenses. If you're planning to offer graphic-design services from your home and will rely heavily on a desktop computer and color laser printer, figure in the cost of paper, toner cartridges, and software updates in your best-case scenario. Also figure in repair expenses on that equipment in your worst-case scenario.

Keep in mind that many small-business owners underestimate how much expenses really cost. If you're running a business part-time, you may not need to get a second phone number or buy elaborate equipment. On the other hand, you may find that you need to set up a website, buy some basic office equipment, invest in business equipment, get inventory for your business, secure a booth at a local antiques mall, and so on. Use WORKSHEET 11-2 above to estimate your business expenses.

Whatever equipment will be essential to your business's success, include it in your worst-case scenario.

Keeping Your Overhead Low

After you think of all the possible equipment you'll need to make your business a success, determine which items would just be nice, which are absolutely necessary, and which you can buy secondhand. Too many first-time business owners spend hundreds or thousands of dollars outfitting their offices, only to find that those expenses don't increase business traffic one bit!

Use the basic principles in this book to create a separate budget just for your business. Make sure that you include all the “hidden costs” — don't underestimate the cost of things like stamps, envelopes, and other incidentals that can really add up in a business.
Suppose you decide that you don't need a fancy desk for your office — a small wooden one will do just fine. You read the classifieds and look through sale flyers from office-equipment stores and find one that's just $75.

That's a few hundred less than a new desk would cost, so it's a good deal, right? Not if you're planning to run a business that doesn't require a desk! If you can do your paperwork at the kitchen table, don't bother buying a desk until you find that you really need one.

Understanding Business Taxes

Too many small businesses have folded because their owners failed to estimate their taxes properly. The federal government (and, possibly, your state government, too) requires you to pay approximately one quarter of the taxes your business will owe for the year's income at four separate times throughout the year: April 15, June 15, September 15, and January 15. This is known as the “pay as you go” system.

In order to make these tax payments, you'll need to estimate how much you'll owe in taxes at the end of the year, divide that amount by four, and send a check for that amount by each due date. If you fail to do so, you may have to pay a penalty when you submit your next tax return.

Estimating these taxes can be a bit tricky, however. The best way to determine how much you'll owe is to do the following:

Estimate your income and business expenses for the year.

Locate a copy of last year's income-tax forms (or last year's tax software program) for both federal and state taxes.

Fill out Schedule C of the federal form 1040 by using your estimated income and business-expense data.

Using last year's income (from your and your spouse's jobs) and last year's federal and state income-tax forms, and adding in your business estimates, find out how much more you would have owed last year if your business had been up and running then.

Subtract the amount you actually owed from the amount you would have owed if your business had been in operation. This is how much more you estimate your taxes will be this year.

Divide that number by four and send that amount on each quarterly due date.

Continuing to use last year's tax-return forms, keep recalculating this number as you go through the year. If your expenses are higher or your income is lower than you thought, you'll pay less in taxes. If your expenses are lower or your income is higher than you anticipated, you'll pay more. Although tax forms change from year to year, using last year's forms will give you a pretty close estimate.

Deciding Whether You're Ready

The following questions can help you decide whether running a small business is the right idea for you. If you check off all of the following questions, starting a small business will probably be right for you:

You're passionate about your business idea.

You have the expertise and skills required to do this job well.

You have a reputation in your community as someone who can be trusted to do a good job.

You've estimated your expenses and income and feel that the business will bring in the extra income you need.

Your business idea doesn't require a lot of up-front cash.

You're willing to spend a lot of time getting your business off the ground.

You can continue to excel at your full-time job while running your part-time business.

You don't mind completing a few hours of paperwork once a month or so.

You're disciplined enough to work during evenings and weekends, even when no one is looking over your shoulder or pressuring you to do it.

Your family is enthusiastic about your business and wants to help.