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I recently covered how tax optimization could allow us to earn an extra $42,000 of income this year (2018) … and pay only $51 in federal tax. Based on our available retirement account buckets (pension, 401k, 457, and IRA accounts), child tax credits, and the standard deduction for married filing jointly … we can earn almost $142,000 and pay no federal tax this year.
If you want more details on our income and tax optimization numbers, please check out – How Tax Optimization Will Save Us Thousands of Dollars.
In that post, I highlight our strategy for deferring a majority of our income so that we pay little to no federal tax. Our goal is to max out our income to just under the breaking point of paying any federal tax.
Calculating our max income level is actually the easy part. The hard part (in my opinion) is coming up with a strategy to boost our income to hit that optimized income level.
This post will cover some ideas on how we can start earning an extra $40,000+ per year –
Ways to Help Boost Our Income
To keep the numbers simple, we currently earn approximately $100,000 in W-2 income per year. It is actually a bit higher, but I like to cover these topics with clean figures. Our tax optimization spreadsheet has our actual amounts down to the penny.
By earning $100,000 … we have room to add an additional $42,000 of income. Personally, I think this is the hard part of optimizing our taxes and income.
Ideas to Earn More
The majority of our income (for now) will continue to come from my full-time job. But in order to boost our income levels … we need to have some additional options.
There are a few ideas that come to mind –
- My Wife Goes Back to Work – She has been at home with our kids for the past 10+ years … which has been great. But one option for boosting our income would be for her to go back to work part-time to help supplement our income. Based on our kids schedules and schools … this may be a little difficult.
- I Put in for a Promotion – This could be an option a couple years from now at my job. It would require more hours and responsibility at work. I am not very excited about the additional working hours … but this is an option for boosting our income. However, getting a promotion would not be able to bring in an extra $42K … so this would only be a partial solution.
- I Get a Part Time Job – Again, this would mean more working hours for me in a day. With my commute to work and actual time working, I am putting in about 50 hours per week at my current job. I could probably add some more hours at a different job … but is that a better option than pushing for a promotion at work?
- Freelance & Consulting – This option has the most appeal for me. Especially if doing freelance and consulting work could eventually lead to starting a business. That would be an opportunity to build an additional income stream that I could transition to once I left my full time job.
- Side Gigs – This is basically a catch-all category which would include small little side gigs or hustles that don’t take much to get started. And because of the low barrier to entry … I think this will be our starting point for earning extra income.
Possible Side Gigs to Boost our Income
Since we are going to initially focus on side gig income … I thought I would provide a brainstorm list of options.
I’m sure this will end up being a growing list over time, but here are some thoughts about different ways to help boost our income through small side gigs. I highly doubt any of them would let us earn an extra $42K per year on their own, but together these could add up.
Airbnb – We have the space in our home, but with 3 children … my wife and I don’t like this option … at all. Plus we are kinda neat freaks and don’t allow people to wear their shoes in our house. This wouldn’t work.
Testing Websites & Surveys – We have looked into both and they don’t seem sustainable. My wife and I have both tried to do surveys and they just don’t cut it for us. Testing websites seems a little more interesting.
Uber – I have actually really considered driving a little for Uber. My drive to and from work is about 45 to 60 minutes one way. Since I am spending this time driving anyways … maybe there is some opportunity here? Another possibility is delivering food through UberEats and Postmates.
Selling Items – I have tried to do retail arbitrage in the past and hate it. I don’t have much interest in buying inventory and even less shipping items. When I tried it in the past, I made a couple bucks after fee’s and shipping costs. One area that I have had some modes success was listing items on the LetGo and OfferUp apps. I have sold about $60 worth of items around our home in the last 2 months. Not a huge return but I don’t have to ship anything but eventually we will run out of items to sell.
Odd Jobs & Tasks – I have been thinking a lot lately about offering up my services (along with my oldest son) to do yard work for neighbors. This could be a great opportunity for my son to start his own little side hustle that could eventually lead to something bigger for him. I’m also planning to search Craigslist to see what kind of services people are looking for in our area. A friend of mine bids on yard work jobs on Craigslist all the time and easily earns $25+ per hour.
Writing/Blogging – I have been a freelance writer in the past for a few financial websites. I never really earned a ton of money from doing it, but I could probably make about $20 an hour if I decided to pick it back up. I like this kind of work as I can normally write late at night or early in the morning when the kids are still asleep.
Virtual Assistant – I enjoy all the aspects of blogging and have started focusing a lot more attention on the social media aspects too. It seems like there is a huge need for virtual assistants in this area … so this is a service I could possibly provide to earn extra income.
Referee/Umpire – I have been coaching sports for years now for my kids. What I have realized is that there is some good money to be made as a referee or umpire. For example, I could easily make $30 an hour umpiring youth baseball games on the weekend. This is something I will certainly look into more.
How Much Extra Do We Need to Earn per Day?
An Extra $42,000 of annual income is about $115 per day.
Based on my current income, I make about $50 per hour at my job. At that rate, I would need to work an extra 2.3 hours each day to make an extra $42K per year.
Unfortunately, earning some extra income doesn’t quite work that way. I’m sure starting out I couldn’t make $50 an hour outside of my full-time job. Eventually … I think that is a possibility.
So maybe I could earn $30 an hour on a side gig? I think that could be a possibility starting out. That would require an extra 3.8 hours of work per day.
Looking at the numbers, I would probably need to work an extra 2 to 4 hours a day, 7-days per week, 365-days per year to hit that $42,000 threshold.
That’s not as easy as it looks unfortunately.
But it doesn’t mean I am not going to give it a shot!
Putting Our Dollars to Work
So why would I care all that much about boosting our income another $40,000 and going through all the extra effort? I mean … based on my calculations above, my wife and/or I would need to work an extra 15 to 30 hours a week to hit this goal.
Personally, we believe this extra work is worth the eventual return. First of all, we wouldn’t be using the extra money to buy a bunch of stuff we don’t need. Instead, we would put those extra dollars to work for us … so they could earn more dollars.
For example, taking that $40,000 of extra income and investing it in dividend stocks would generate an extra $1,200 a year in dividends at a 3% yield. Overtime, we would let our dividend compound … which would earn us even more income.
Second … the majority of this income wouldn’t have any federal tax. By optimizing our taxes and income … we have the opportunity to earn an additional $42,000 a year. It’s important to point out though the any additional income would likely have payroll taxes taken out and possibly state taxes paid on it.
Our goal is to sacrifice a little bit now (by working more hours) so that we can have sustainable income in the future when we reach financial independence.