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I'm no stranger to the world of side hustles. For years, I worked for a financial firm but took on writing projects on the side for extra money. I also did that because I was hoping to eventually leave the finance world and do something more fun and creative.
I didn't mind working a side hustle in my 20s when I had a fair amount of free time despite a demanding work schedule. And the extra money was great for my budget . But by the time my 30s rolled around, I was largely done with the side hustle routine.
By then, I had kids, which meant I no longer had the time (or, frankly, the energy). Also, to be fair, by my 30s, my career had shifted to full-time writing, so a side hustle was really just a one-off writing project from a random client I'd never work for again. It didn't seem worth the stress.
But there's another reason I was able to quit side-hustling in my 30s: A lot of the extra income I earned during my 20s is money I managed to save. And that gave me plenty of options for earning passive income so that I didn't have to bother with side hustles at that stage of life.
If you're deep in the throes of side-hustling, you might assume that you'll be stuck in that world forever. But I'm here to tell you that if you save your side hustle income rather than spending it all, you can set yourself up to make money passively like I do.
How to set yourself up with passive income
Passive income can take on several forms. It can be the interest you earn in a savings account or certificate of deposit (CD). It can also be dividend income you earn from a stock portfolio.
My passive income strategy is using a combination of CDs and stocks, but yours should depend on your income goals and appetite for risk. Stocks are a riskier bet than CDs because your portfolio can lose value during periods of volatility. However, I'm also a long-term stock investor, which reduces that risk because it gives me time to ride out market downturns.
Now here's the tricky part: To earn a meaningful amount of passive income, you need to have a meaningful amount of money in savings or stocks. There's no getting around that. Right now, for example, many CDs are paying 5%. But at that rate, to earn $1,000 a year in passive income, you need $20,000 in a 12-month CD.
Similarly, if you have a portfolio of stocks with a 4% dividend yield, it'll take $25,000 in investments to earn $1,000 a year. And you may need to work a side hustle for a while to save up $20,000 or $25,000. You might also have to spend your main salary mindfully and keep your larger expenses (like housing and a car payment) low.
But once you reach that point, you can start to move away from the side hustle lifestyle and instead put your money to work. So if you're willing to hustle when you're younger, you may reach the point where you can then kiss those extra hours of toiling goodbye.
It's a process, but you'll get there
I spent many years working side jobs to build savings and carve out a sizable amount of money to invest. And my approach also required a lot of discipline.
Trust me when I say that it was tempting to spend my side hustle income on fun purchases instead of banking almost all of it (I did occasionally treat myself to things). But that approach has allowed me to sit back and earn a decent side income without having to lift a finger.
It may take you a while to build up the cash reserves to earn a meaningful income from CDs, dividend stocks, or your passive income source of choice. But be patient. If you keep at it, you'll get there in time. And you'll be all the more grateful for your newfound free time, too.
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