Spend the Extra Money From
Your Spare-Time Business Wisely
and Start Building Real Wealth
Your spare-time business can help you build a nice cash flow and, therefore, increase your financial independence.
But it can also get you started on the path to building real wealth.
The first step, of course, is earning money, which you’re already taking action toward doing.
But the flip side of that is what you do with the money once you get it. How you spend or invest it is just as important.
In a future issue of Spare-Time Biz Success, we’ll look at various options you have to grow your wealth. But today, we’re going to look at how you’re currently spending your money, so that those wealth-building options will be a reality for you.
When you start earning “extra money,” it’s easy to find things to spend it on rather than saving it to invest in your future or to provide a cushion against difficult times or unexpected expenses.
So today, I have a challenge for you.
I want you to take a close look at your existing spending habits. I’m willing to bet you can find an extra $100 dollars a month – or more.
What a difference saving even $100 makes …
Let’s say you manage to spend $100 less a month. That doesn’t sound like a lot, right?
But that adds up to $1,200 a year. If you put that money each month into an online bank account that earns 3% interest each year, within 5 years you’ll have saved $6,000 and earned about $480 from interest for a total of $6,480.
That’s with very little effort.
If you find $200 a month to save in the same time frame, it’ll grow into almost $13,000 with about $1,000 of that earned from interest.
When you combine extra income with extra savings, it doesn’t take long to build up a nice reserve. And every little bit means more financial security for you.
Remember, we’ll look at much bigger wealth-building strategies in the future, but this simple lesson in savings will help you prepare.
So how do you find that extra money each month?
Become more mindful about how you spend.
Being mindful plays a big role in growing wealth. It can be easy to absentmindedly burn through your new revenue, without even realizing it.
Last year, I learned a good exercise on being mindful from AWAI member Penny Thomas at the 2008 Web Copywriting Intensive. She taught me to measure the real value of the things I buy, in terms of my time.
Take a minute right now and add up how much you earn in an average week and how many hours it takes to earn it.
If you commute, include those hours. If you do marketing or administration tasks for your freelance business – things that aren’t directly billable – include those hours, too.
Now divide your average weekly earnings by your average weekly hours worked. That’s how much an hour of your time and energy is worth in terms of dollars.
For simplicity, let’s say you make, on average, $1,000 a week. You work about 45 hours a week at your job, and it takes you 30 minutes each way in the car to commute to and from work.
So, in total, you spend 50 hours each week to earn that $1,000. That means each hour is worth $20.
Moving forward, whenever you plan to buy something – like a fancy cup of coffee or an expensive lunch – think for a moment on how much time you have to work in order to pay for it.
Is it worth it?
If the answer is yes, then go for it. If it’s no, find a less-expensive alternative or forego the purchase completely.
For example, if you buy a latte each morning from your local coffee shop, you spend about $4 a day. If you do that five days a week, that’s about $80 a month. Switch to the $2 drip coffee and you’ll save $40 a month without giving up your morning coffee.
Eating out is another good example. When I worked in an office environment instead of at home, I ate out for lunch at least four times a week. And on average, I was spending about $10 per lunch.
If you eat a $10 lunch four times a week, you spend about $160 a month. Cut that down to twice a week and you’ll save $80 a month. Combine that with your coffee savings and you’re already at $100 a month.
The trick is asking yourself if the time you have to work to pay for that $4 latte or $10 lunch is really worth it.
At $20 an hour, you have to work 12 minutes for that latte and half an hour for that lunch.
What do you absentmindedly spend money on? Track your expenses this week, and then compare it against the value of your time. Just by making a few small changes, you’ll be amazed at how much money you can save, without feeling deprived.
Regularly audit your automatic expenditures.
Now that you’re more mindful of how you’re spending your cash, it’s time to take a closer look at your fixed monthly expenses.
If you’re like most people, you have some automatic payments that process each month to your bank account or credit card.
It could be the cable bill, a gym membership, your car insurance, etc. Or it might even be a service you used to use but no longer need.
Sit down for an hour this weekend and review your automatic payments. Cancel any that you don’t need anymore and reduce those that you can.
For example, maybe a scaled-down cable package would better suit your busy schedule. Or maybe it’s been three years since your last speeding ticket, so you’re in a better position to renegotiate your car insurance rate.
Doing this can quickly save you $50 to $100 or more a month.
And then plan to re-evaluate your automatic payments at least twice a year, if not every quarter. You’ll be taking a big step toward achieving your financial goals.
And that takes us to the final piece of this process …
Write down your financial goals.
What kind of money are you hoping to make from your spare-time business? How much money do you want saved a year from now? How about three years from now?
Your financial goals are just as important as your career and personal goals. And the process of thinking through what you want to accomplish and then writing it down is the first step toward building a plan that will take you from where you are now to where you want to be.
Goal-setting is a powerful process. If you need help getting started, I highly recommend checking out the Accelerated Income Goals System written by Dr. Joe Vitale. Along with setting your goals, Joe will help you recognize and then eliminate any roadblocks that may get in your way.
Parting thoughts …
Building wealth takes discipline and time, but it’s worth the effort. Follow the steps here and, before long, you’ll find yourself with more financial freedom and a fallback plan, should you need it.
You’ll also find yourself more satisfied with your buying decisions and on a better path toward achieving your financial goals.
And if you’ve yet to choose a spare-time business, or you’d like to start a second one, think about starting a money-making information website. It will take you only a few hours each week and can make you anywhere from $500 to $5,000 or more each month in passive income. It’s truly a “spare-time” business.
The Professional Writers’ Alliance
At last, a professional organization that caters to the needs of direct-response industry writers. Find out how membership can change the course of your career. Learn More »