2020 Side Income Results – Earned an Extra $6,000!
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Even though the world was dealing with a global pandemic, 2020 was still a solid year for our family … earning side income.
Before I get into what we are doing to earn side income, let me give a brief summary of where we earn our money.
We are a single income household … when it comes to earning a W2 paycheck.
This income (from a job) is used to pay our monthly bills, invest into a retirement plan, invest into taxable brokerage accounts, and save a bit each year to our emergency fund.
This job is also how our family gets health and dental insurance, along with other benefits.
Taxes are paid on this income.
For now … this W2 income is enough to get by. But just “getting by” is a bit risky in my opinion.
If we simply relied just on this income, we could be in trouble if that job went away.
One way we are working to reduce this risk is to build side income streams … which I plan to cover today.
Side Income Streams
For years I have been messing around with building side income streams … with most of them not amounting to very much.
A few have been successful like building a dividend income portfolio.
But overall, a lot of my ideas have gone nowhere. Some of this is because I give up too quickly or lose interest.
This doesn’t mean I am going to give up. My plan is to start working smarter this coming year and not give up.
In order to kick off the new year and build some momentum earning side income, I thought it would be great to give a rundown of our 2020 results.
In total we brought in an extra $6,000+ of side income last year, which is detailed below.
1. Dividend Income
My wife and I have been working on this side income stream for the past 13 years.
Since 2008, we have been earning dividend income from companies we own in taxable brokerage accounts.
Last year we earned $3,886.97 in dividend income … a 9.6% increase from the prior year (2019).
All of the dividends we earn are currently being invested back into additional stocks, so that we may continue to compound our income.
We have a goal to earn $4,500 of dividend income in 2021.
And for anyone worried about tax implications … the majority of this income is from qualified dividends. Based on our overall tax strategy, almost all of this dividend income will not be taxed.
This is one of the reasons why I like earning dividend income compared to other sources.
2. Interest Income
With interest rates so low, we don’t actively try and earn much income this way. The best rate we are earning (at the time of this writing) is 0.5% from our Ally Bank Savings account.
Last year we earned a total of $266.67 in interest … mostly from that savings account and a little from some certificates of deposit.
The only reason that our interest income was this high is because we sold our home last fall (2020) and needed a place to park our equity from the sale.
Some of the equity from the sale of our home is being invested into the stock market. While the majority of it will continue earning a small amount of interest until we purchase our next home.
We decided to rent a townhouse for 1 to 2 years, while we build our next home.
By the way … this income will definitely be taxed … unlike our dividends.
3. Options Income
Another way I like to earn a little bit extra income throughout the year is by selling option contracts.
Trading stock options can be a very risky strategy for earning more income. This is why I like to keep things simple by only making the following types of trades –
- selling put options
- selling covered call options
I won’t get into all the details of trading options, but I feel both types of trades I mentioned above are low risk.
Last year, we earned an extra $1,449.77 from selling put and call contracts.
For those of you who are options traders … I only sell out of the money contracts and try to buy them back at a much lower price before they expire.
I only sell call options for stocks I own and would be willing to one day sell for the strike price.
And I only sell put options for a stock that I would be willing to buy one day for the strike price.
The option income I earned last year was used to help build up our position of AT&T (T) stock. This move will allow us to compound the income even more by earning dividends from the stock purchased.
One last thing … this income will definitely be taxed when it comes time to file. The good news is that we have been able to optimize our income and taxes to keep the impact low.
4. Bank Bonus Income
One new income stream I tried to start in 2020 was earning bank bonuses.
I fell way short of my goal to earn $3,000 in bank bonuses last year. Instead, I mustered up $300 of side income by opening up 4 different checking accounts.
My goal for this coming year is to earn an extra $3,000 again, which may seem like a lot. However, there are some people who earn over $10,000 per year on this side income stream!
Now even though this income is taxable, earning an extra $3K or even $10K could go a really long way in building up our dividend income stream.
From what I have figured out on my own so far … and from reading of others experience … you need to keep detailed records and be very disciplined about earning bank account bonus income.
Otherwise, you could miss out on getting your bonus if you don’t meet the requirements. And if you don’t keep track of your accounts, you could also mess up and have bank fee’s put onto your account which will cost you money.
5. Side Hustles
This last category of side income is basically a “catch all” from a couple different places.
With COVID and not having much going on last spring, I picked up a couple side jobs laying mulch for a local landscaper.
I got to spend some time outside in the sun, away from people, getting some exercise … and earned an extra $230. Of course, this extra bit of money was used to add some stocks to our dividend income portfolio.
One observation I have realized is that despite the unemployment rate and people out of work … most people don’t want to do this kind of work – laying mulch or manual labor.
My oldest son and I have been seriously considering starting a small landscaping company of our own to capitalize on this. My son is 17 and he loves to do this type of work, so we may push forward on this in 2021.
Between my wife and I, we were able to earn another $59.59 in cash back from our Rakuten accounts. This is just income earned from using the tool to make our online purchases as we normally would.
In total, we earned an extra $289.59 in miscellaneous (side) income in 2020 … of which we will pay taxes on.
Looking forward to adding some more of this type of income in 2021.
2020 Side Income Total
Even though I really felt like I botched our side income streams for 2020, we still earned collectively over $6,000.
Some of this income is taxable … some is not from qualified dividends.
2020 Side Income Total = $6,193
From the different income steams I highlighted, our dividend portfolio is by far our best source. And by design, any extra income we earn is dumped right back into that income stream when we purchase new stocks. I like to call this recycling our income.
I am really going to try hard and make it a priority to bump up our side income streams in 2021.
Speaking of income … I just wanted to point out that we do earn other income, which I don’t really consider part of this roundup. Below I have briefly detailed those other sources simply for transparency.
Other Income Sources
We are a single income household … in the sense that I have a full time W2 job. My wife is a stay at home parent helping our children get through remote learning.
Last year, we also earned income from the following sources –
- W2 income – from my job
- stimulus checks – based on our income level, we did receive some of the stimulus payments sent out in 2020
- inherited RMD (required minimum distribution) – we inherited an IRA about 2 years ago when one of our parents passed away
Just a few quick notes about these sources of income and how we use them.
The W2 income currently pays the bills. If there is any leftover, it is invested into dividend paying stocks.
Stimulus money was used to help fix up our home before we sold it last year. The other stimulus money was used to … you probably guessed it … buy some dividend stocks.
Our RMD income is rather low at this point, but the funds are used now to invest in both of our Roth IRA accounts. We currently don’t use any of this income for spending.
Building Multiple Side Income Streams
I have found that building multiple side income streams has its challenges … mostly caused by myself.
Most often I get really excited about starting a new income stream at first … and then the sizzle dies out and I get bored with it.
For example, over the past 10+ years I have attempted to build a collection of websites that could earn side income. In those 10 years I have probably earned about $1,000 from those sites.
It isn’t that earning income from websites is impossible … but it can be very time consuming and a ton of work. I always seem to get bored and lose interest.
My goal for 2021 and beyond is to simplify my approach to building side income (especially from online sources) and stay on track.
After all … we have worked the past 13 years at building our dividend income stream one month at a time, so why can’t I do the same with other income streams?
Did you have any success in 2020 building side income streams?