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How These Side Gigs Saved Our Finances

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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As the summer came to a close, Anthony Garcia, 34, achieved a big financial goal: He bought a lightly used car that he loved, a 2015 Jeep Renegade, to be precise. When all was said and done, the purchase set him back $14,500.  

It’s Garcia’s active side hustles that cushioned the monetary blow, helping him make a $1,000 down payment before financing the rest with a low-interest loan.  

“My main side gig is deejaying,” the Long Beach, Calif., resident told MagnifyMoney. “What I make varies, but weddings range from about $800 to $1,000; corporate events, clubs and bars range anywhere from $200 to $500 per event.” 

Garcia, an online banking specialist for a local credit union by day, has been picking up work as a DJ on and off for about seven years. These days, he books two or three gigs per month. He plans to use the money to cover his monthly car payments. 

“It’s almost like not having a car payment,” says Garcia. “I love what I do and get a car out of it, as long as I’m working on a steady basis.” 

His story isn’t without precedent. According to new research from CareerBuilder, close to a third of American workers have side gigs, with those under 35 making up the biggest piece of the pie. What’s more, a recent Pew Research Center survey found that 24 percent of Americans bring in money from what they call the digital “platform economy” — think apps and online platforms like Uber, TaskRabbit, thredUp and beyond. Some do it by economic necessity, others for extra cash.  

The findings suggest that today’s most popular side gigs cover everything from ride services to shopping/delivery tasks to selling your old clothes and gadgets online. 

Then there are folks like Garcia, who leverage an existing skill to bring in some additional income. 

Along similar lines, Dana Bruce, a 38-year-old nonprofit executive in Alexandria, Va., spun a random hobby into a legit side gig that paid for most of her 2012 wedding. 

But how? 

‘A side gig paid for my wedding’

Bruce is living proof that your greatest interests might also be your best income generators. A longtime lover of antiques, she took to Etsy in 2012 and began selling vintage lamps; it’s a task she absolutely loved. 

“The overhead is very low, so at times it brings in as much as $1,000 net income a month,” said Bruce, who combs antique malls, thrift stores and estate sales for unique finds. After factoring in all her costs, she typically nets about $65 per sale.  

This wasn’t the first time she dipped her toes into the gig economy. From 2012 to 2013, she took on an adjunct professor position at a community college on the side, where she earned roughly $450 per month. She put the money toward her car payments, adding some wiggle room to her monthly budget. This, combined with her Etsy earnings, allowed her to kick in about $10,000 toward her November 2012 wedding.  

And she isn’t slowing down. Her next goal is to use side gig money to help pad her home-buying fund. 

A side hustle, and a career change

It’s no secret that a healthy emergency fund is the foundation of financial success, but actually building up three to six months’ worth of expenses is no small feat, especially on an average income. This is exactly why Hilary Murrell, a 27-year-old campus visit coordinator at a Birmingham, Ala., university, is upping her side gig game. A little over a month ago, she began tutoring student athletes in the evenings and on Sundays for $11 an hour. 

“Side hustling is very new to me, but very welcome since I’ve been looking for an online side gig for months,” said Murrell, who draws a $35,000 salary with her 9-to-5 job. “My big financial goal is to save up enough money, plus emergencies, to live for three months while my husband quits his full-time job to be a full-time Realtor.” 

Tutoring serves double duty, as it also gives Murrell more teaching experience, which will come in handy for her next side gig: teaching at a local community college next semester. Her goal is to bring in around $700 per term. 

Side gigs and your taxes 

Got a side gig, or even more than one? Just be sure to report your additional income to Uncle Sam. Paying taxes comes with the territory, regardless of how much cash your side hustles bring in. Uber and Lyft drivers, for example, are considered independent contractors, not company employees. As such, paying federal and state income taxes falls on you. Come tax time, those who earn $400 or more will likely be on the hook for a self-employment tax, too. 

In addition to filing an annual tax return, self-employed folks are generally required to pay estimated taxes on a quarterly basis. (Failing to do so could result in a big tax bill when tax time rolls around.)  

But wait, there’s good news, too. Many self-employed workers are also eligible for deductions to help offset their tax burden. If you use part of your home for business, for instance, you might qualify for the home office deduction 

In the end, every case is different, so it may be in your best interest to seek out a professional to help answer your individual tax questions. 

In the meantime, the gig economy appears to be going strong. According to the annual Freelancing in America survey put out by the Freelancers Union and Upwork, the freelance economy grew to 55 million Americans in 2016; that’s 35 percent of the U.S. workforce. The way we work is changing, and the side gig revolution seems to reflect that, as multiple income streams gradually replace the traditional “9-to-5 till you die” way of life. The takeaway? The rewards can be big for those who are willing to hustle. 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Marianne Hayes
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Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here

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How to Save on Back-to-School Shopping

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Parents often revel in the calm and quiet that comes when kids head back to school, but they aren’t likely to enjoy the excess spending that also accompanies the back-to-school season. According to the National Retail Federation, parents will set a record in 2019, spending an average of $696.70 per household on children in elementary school through high school.

 

“It was interesting to see the across-the-board increases in spending levels,” said Mark Mathews, vice president for research development and industry analysis with the NRF. “Elevated levels of consumer sentiment, healthy household balance sheets, low inflation and recent wage gains all seem to be contributing to a confident consumer who is willing to spend money on back-to-school supplies.”

If you’re planning a trip to the store before classes start, there are a few ways to curb the spending and save some bucks.

Plan ahead

No parent should set foot out the door for back-to-school shopping without first taking stock of what they already have. Plenty of old supplies from previous years might still be usable, especially arts and crafts items like crayons, pencils and pens, as well as more expensive things like backpacks, lunch boxes and calculators.

Crossing a few items off your list is a good first step when it comes to saving, but learning how to budget is also important. It’s tempting to run down the back-to-school aisle and grab every colorful notebook and snazzy pencil case in sight, but it doesn’t make a lot of financial sense. Create a realistic budget based on the items you actually need, and try your best to stick to it. If possible, do most of your shopping online, since it’s easier to keep a running tally of how much you’re spending as you shop.

Be smart about sales

Although you’re bound to run into many back-to-school sales this time of year, you don’t need to buy 12 notebooks just because they’re cheaper right now. In fact, you shouldn’t assume the sales price is the best price at all, said consumer savings expert Andrea Woroch. Instead, always comparison shop.

“Run a quick Google search online or on your phone to see if another store is selling the same or a similar item for less,” she said. “Most big box stores will price match, so you won’t even have to drive to another store to get the better deal.” For example, Target,Staples and Walmart all have price matching policies.

Clip coupons and shop discount stores

Coupons have definitely made a digital comeback, with countless apps and websites dedicated to listing all your options in one place. “Spending a few minutes looking for coupons can help you get a better discount,” Woroch said. “Use apps like CouponSherpa, for instance. Or, use the Honey browser tool, which automatically searches and applies relevant coupons to your online order.”

Many stores also offer discounts to valued customers who sign up for their rewards program, like Walgreens and CVS, while craft stores like Michaels regularly offer discounts. Don’t knock purchasing basics like paper and writing supplies from the Dollar Tree, either — you might be surprised by what you find, and those types of items are often the same quality wherever you buy them.

Tax advantage of tax-free holidays

On select dates throughout the year, different states offer state sales tax holidays, or days where you can purchase items without having to pay sales tax on them. You can find a full list of the 2019 state sales tax holidays here, but some upcoming ones include:

  • August 18-24: Connecticut, clothing and footwear
  • August 17-18: Massachusetts, specific items costing less than $2,500 per item

Split bulk purchases

You can usually save money by buying certain items — like construction paper, pens, pencils and folders — in bulk, but you can save even more by splitting those bulk items with other families. Not only is this a great way to share savings, Woroch said, but you can earn rewards faster by charging everything on your card and then having the families pay you back.

Redeem your rewards

If you have a cash back credit card, now’s the time to use it. “Most credit cards give you the best redemption value when you opt for statement credit or have the cash rewards deposited into your bank,” Woroch said. “You can set this money aside for back-to-school shopping.”

Alternatively, Woroch suggested checking to see if your particular card allows you to redeem points for gift cards to retailers where you plan to shop.

Use discounted gift cards

Besides redeeming credit card points for retailer gift cards, you can also scour the web for cheap gift cards online. Planning a trip to Target? Scan websites like Raise,Cardpool and CardCash first. These sites buy and sell unused gift cards at a discount, meaning you can save on purchases you were planning to make anyway.

Consider having your kids contribute

Depending on your child’s age, back-to-school shopping might be the perfect time to start having them contribute to their own goods, especially if they earn an allowance or have a job. Talking to your kids about money at a young age — whether about budgeting, saving or spending — will help them develop solid money habits that will pay off in the future.

Parents already seem to be catching on to this idea. “It was surprising to see how much of their own money kids are contributing towards the back-to-school bills,” Mathews said. “Teens and pre-teens will be spending $63 of their own money, which works out to $1.5 billion overall. This is significantly higher than the levels we saw a decade ago.”

Although the news about increased spending on back-to-school supplies may be alarming, these days there are more ways than ever to save. A little ingenuity, resourcefulness and research can go a long way.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Cheryl Lock
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Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at [email protected]

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Survey: Most Americans Have Raided Their Retirement Savings

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Successfully saving for retirement requires dedication and self-restraint, but more than half the country admits to robbing their future selves in order to satisfy today’s spending needs, according to a new survey by MagnifyMoney. While the economic pressures bearing down on workers today make their actions understandable, the hard truth is that many Americans are turning an already-difficult task that much harder by tapping into their retirement savings early.

Key Findings

  • Approximately 52% of respondents admit to tapping their retirement savings account early for a purpose other than retiring: 23% have done so to pay off debt, 17% for a down payment on a home, 11% for college tuition, 9% for medical expenses, and 3% for some other reason.
  • About 29% say there are some scenarios where it is a good idea to withdraw money early from a retirement savings account.
  • Around 60% of respondents do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea, and 15% have no clue.
  • Almost 25% are unhappy with their retirement savings. 47% are happy with the amount saved, and about 28% are neither happy nor unhappy.
  • Finally, 27% have never thought about how much money they’ll need in retirement.

Why are Americans tapping their retirement savings early?

The two main reasons respondents cited for withdrawing money from their retirement savings are as American as apple pie: home ownership and personal debt. According to the survey, 23% of those making an early withdrawal did so to help pay down non-medical debt, while 17% needed the money for a down payment on a home.

Although the housing market appears to be cooling off compared to just a few years ago, a down payment on a home still requires a significant chunk of change — experts recommend a down payment equaling 20% of the total mortgage to optimize your mortgage payments.

Personal debt, from credit cards to student loans, remains a fixture of everyday economic reality for millions of Americans. In other words, the stressors that cause workers to raid their retirement funds don’t look like they will decrease appreciably in the foreseeable future.

Which Americans are withdrawing money the most?

Breaking down the demographics, older savers are less likely to withdraw money from their retirement fund than younger savers. 54% of millennial savers say they’ve taken an early withdrawal from a retirement savings account, compared with 50% of Gen Xers and 43% of baby boomers. This stands to reason considering that many millennials have now entered the stage of life where they are getting mortgages, starting families and taking on bigger financial obligations while also being decades away from the traditional retirement age. Millennials are also more likely to say that raiding your retirement fund is justified under certain circumstances, as seen in the chart below:

Just one of many bad retirement savings habits

Tapping into retirement funds — whether an employer-sponsored 401(k) or a traditional IRA — before the appropriate age almost always comes with a financial penalty in the form of additional taxes and fees. What is more, you’re diminishing the principle that fuels the compound interest you need to meet your retirement savings goals.

Unfortunately the survey reveals early withdrawals are just one of the many bad habits Americans engage in when it comes to retirement savings. This list of less-than-ideal practices includes:

  • 35% of Americans are not currently saving for retirement. Of those who are, 37% started saving at age 30 or above, and 12% started saving when they were older than 40.
  • 60% of Americans do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea and 15% have no clue.
  • Nearly 1 in 5 Americans don’t contribute enough to their employer-sponsored retirement account to get the maximum company match. Maximizing a company match is one of  your best ways to maximize your retirement savings. Among those with an employer-sponsored retirement savings plan, just 17% of respondents contribute 10% or more of their take-home pay. Almost 5% contribute nothing at all, and nearly 6% are unclear about how much they contribute.

  • Approximately 42% of respondents have made the mistake of withdrawing their entire balance from an employer-sponsored retirement plan when changing jobs without rolling it over – and nearly 15% have done so more than once. A little more than 47% of millennials admit to this faux pas.

The most damning finding of all is that 27% of those surveyed have never thought about how much they’ll need in retirement. And while “ignorance is bliss” may hold true when it comes to some things in life, this expression should not apply to your retirement plans.

Methodology

MagnifyMoney by LendingTree commissioned Qualtrics to conduct an online survey of 1,029 Americans, with the sample base proportioned to represent the general population. The survey was fielded June 24-27, 2019.

Generations are defined as:

  • Millennials are ages 22-37
  • Generation Xers are ages 38-53
  • Baby boomers are ages 54-72

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here