In this article, we’ll cover:

• Key differences between saving and investing
• When to save and when to invest

The key differences between saving and investing

Saving and investing are distinct financial concepts. While they both involve putting money toward the goal of increasing your assets in the future, they have very different functions and results when it comes to time horizon, potential for returns, liquidity, risk, and inflation. Once you understand the differences, you can determine how each fits into your financial plan. 

Your future goals

Some of your future financial goals are achievable sooner than others. If you’re looking at the short term, think of savings. If your goal is further into the future, consider investing. 

• Short-term goals: Saving can be a good choice for achieving short-term financial goals like taking a vacation, buying a car, getting a new computer, or putting a down payment on a home. Opening a savings account is also ideal for building up an emergency fund to cover large, unexpected expenses or get you by if you lose your job. 
• Long-term goals: In contrast, investing is more appropriate for achieving large goals far in the future, like paying for your kid’s college education or setting yourself up for retirement. Investments have the potential to grow your money more over time by earning higher returns than you’d get from earning interest in a savings account, but you may need to keep your money invested over the long haul to realize those gains. 

Potential returns

The return on investment (ROI) differs quite a bit between saving vs. investing. The entire point of investing is to earn returns. Saving is more about setting aside money over time, but earning interest in a savings account certainly does grow your money more than hiding it in your mattress. Most traditional savings accounts pay some interest, and you can often earn an even better rate with high-yield savings accounts, money market accounts, and certificates of deposit (CDs). Interest rates are variable, and often rise and fall in relation to inflation. The longer you keep your savings in an interest-bearing account, the more you can take advantage of compound interest, which is when the interest you’ve earned also earns interest. 

The ROI on different types of investments can vary greatly, but over the long term they usually outpace both inflation and what you could earn through interest in a bank account. The historical average return for stocks is around 10%, while bonds have historically produced 5% to 6% in returns on average. Other investment vehicles like mutual funds, index funds, and ETFs vary quite a bit in their average returns, since each fund contains a different mix of multiple assets. But because they usually hold stocks and bonds, funds tend to offer more lucrative long-term returns than a simple savings account. 

Impact of inflation

Inflation measures how much the cost of products and services rise over a given period of time. When inflation goes up, your purchasing power goes down; your dollars don’t go as far as they used to. This is an important consideration for your savings. If the interest rate on your savings account is lower than the inflation rate, it erodes the value of your savings over time.  

The money you earn today will have less purchasing power in a couple decades, so you want your investments to generate enough returns to compensate. Investing is often used as a hedge against inflation because the returns are generally higher than inflation over the long term. That’s why investing is typically advised for financial goals far into the future, like retirement. In fact, some investors pursue strategies intended specifically to profit from inflation. 

Liquidity (how accessible your money is to you)

Liquidity describes how quickly you can get your hands on your money. Cash is your most liquid asset; actual dollar bills in your wallet can be spent any time. Money in your savings account is also incredibly liquid because you can easily withdraw it at the bank or ATM. The only drawback is that some savings accounts charge a fee if you make more than six withdrawals a month. Liquidity gives you the flexibility you need to spend your savings, such as tapping your emergency fund for a big car repair or buying that TV you’ve saved up for when it goes on sale. 

Investments are typically less liquid than savings; the amount of rigidity varies among asset and account types. Certain types of investment vehicles, like bonds, may have a fixed term that requires you to stay invested for a certain amount of time. Stocks and shares of many funds are more liquid in that they can be sold any time, though it usually takes three business days to get your money. And if you’re selling stock because you need the money for an emergency, you run the risk of having to sell at a loss. Tax-advantaged retirement accounts, which are types of investment accounts, are extremely inflexible; you usually can’t withdraw money before age 59 1/2 without incurring steep penalties. Finally, if you invest in things like collectibles or real estate, your money is locked up in those assets until you can find a buyer, which could take a lot of time and effort.  

Risks involved

People usually think about risk when it comes to investing, but not savings. It’s true that putting money into savings is generally quite low-risk. As long as you keep savings in an FDIC-insured bank account, you’re protected even if the bank were to go under. That said, saving money comes with certain risks, too. For example, if you only keep money in a traditional savings account without investing some of it, you run the risk that it won’t grow enough to keep up with inflation, leaving you with a lot less spending power in retirement. There’s also the risk associated with variable interest rates. If your bank drops interest rates, the return you’re earning on your savings will drop as well. 

With investing, there’s always the risk that you could lose money if the value of your assets drops below what you paid for them. Business risk is the potential for a stock to lose value due to financial or management issues with the company. Geopolitical risk comes into play when things like war, terrorism, and trade relations impact the economy. And overall market volatility can cause the value of your portfolio to fluctuate. One way investors can manage these investment risks is by diversifying their portfolios. Diversification reduces risk by spreading the holdings in your investment portfolio across different asset classes like stocks, bonds, and funds. If one of your investments loses value, others may hold steady or even grow.

When to save your money

How do you decide when you should be saving vs. investing? Consider what you’re trying to achieve. Saving is well-suited to funding things you want within a few years and protecting your financial well-being when life throws you a curveball.  

• Financial goals: If there’s a large purchase you want to make in five years or less, saving for it makes sense. That’s too short a time to be confident that investments will grow, but not so long a timeframe that inflation is likely to seriously erode your purchasing power. 
• Emergency funds: If your dog needed emergency surgery tomorrow, could you pay for it without going into credit card debt? What about if you were laid off; how long could you cover your basic living expenses before your bank account was empty? These kinds of scenarios are exactly what an emergency fund is for. Putting aside money to cover unexpected expenses is one of the primary uses for a savings account.  

If you want to save up more, look for ways to spend less. From sticking to a budget to reducing discretionary spending to lowering your bills, reducing how much money you spend increases how much money you can put into your savings. 

Places you can park your cash and save

When you’re stashing money aside for an emergency fund or savings goal, you can put it to work earning interest so your savings grow faster. There are several different kinds of deposit accounts where you can store your savings, and they vary in the details of potential interest rates, liquidity, minimum balances, and fees.  

• Traditional savings account: A basic savings account usually offers a pretty low interest rate; the average APY (annual percentage yield) was 0.46% as of December 2023. But there are often low or no minimum balances or fees, making them accessible if you’re just getting started with saving.  
• High-yield savings account: This type of account functions just like a traditional savings account, but offers much higher interest rates. At the same time, many require you to maintain a minimum balance and might charge account maintenance fees, which can eat into your returns. There’s often a minimum opening balance, too, so you’ll need to already have some funds accumulated before you can open an account. 
• Money market account: If you want higher rates and more liquidity, money market accounts can be a good place to keep your savings. Their interest rates are usually close to high-yield savings accounts, and, unlike savings accounts, they come with a limited number of checks and debit transactions a month. That makes it even easier to spend your money when you want to. Be aware that minimum balances and fees are common with these accounts. 
• Certificate of deposit (CD): Savings and money market accounts offer variable interest rates, so they could go up or down at any time. CDs, on the other hand, give you a fixed interest rate for a set term, usually between six months and six years. CDs often have interest rates as good as or better than high-yield savings accounts, but the trade-off is a lack of liquidity. If you withdraw your money before the term is over, you’ll generally lose some of the interest you’ve earned. 

When to invest your money

Are you many years, or even decades, away from retirement, sending your kids to college, or putting a down payment on the house of your dreams? Do you have an emergency fund and enough money in savings for your short-term needs? Have you paid down any high interest debt? If so, it may be time to start investing your money. Investing is most likely to help you reach longer-term goals: things for which you need to build up a large amount of money, but you won’t need it any time soon. Consider investing when:

• You don’t need the money within the next five years: Keeping your money in investments for at least five or ten years may lead to better returns in the end. Long-term investing, also known as a buy-and-hold strategy, is the idea that you hang onto assets long enough to ride out the inevitable ups and downs of the stock market.
• Your employer offers 401(k) matching: Many employers will match your contributions dollar for dollar up to a certain percentage of your salary. It’s like free money for your retirement account. If your financial situation allows, invest at least as much as your employer will match so your retirement account grows more quickly. 
• You want tax advantages for retirement investments: The money you put into 401(k)s and traditional IRAs is pre-tax, meaning you don’t pay income tax until you withdraw it in retirement. Your contributions now are subtracted from your taxable income when you file your return, reducing your current tax burden. 

Whether you’re a hands-on DIY investor, prefer working with a financial advisor, or enjoy the ease of an automated robo advisor, opening a brokerage account is the first step in your investment journey.  

Saving vs. investing: strike the balance you need for financial security

Saving and investing aren’t mutually exclusive. Understanding how to use both strategies empowers you to work toward your goals in the short term and far-off future using the right types of accounts for what you want to achieve. Something saving and investing have in common: the sooner you start, the more time your money has to grow. Start finding your balance today.

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There are many components of personal finance, and the specific areas of financial planning that matter to you depend on your unique circumstances. Whether you want to focus on five, seven, or ten elements of a financial plan for 2024, taking a look at your entire financial picture can give you the knowledge and resources you need to tackle your priorities. Read on for a comprehensive financial planning checklist to organize and streamline your approach to a prosperous 2024.

Elements of your financial planning checklist:

1. A financial check-up
2. Emergency fund
3. Debt
4. Insurance
5. Investments
6. Credit score
7. Tax preparation
8. Retirement plans
9. Family and estate planning
10. Financial goals
11. Your 2024 budget

1. Take stock of your personal finances

Start the new year off on the right foot with a thorough assessment of your current financial status. Think of it as a financial health check-up to get a clear picture of where you stand. Review the components of your financial planning, including your income, expenses, assets, and liabilities to understand your financial strengths and potential areas for improvement. This baseline assessment will help you set realistic and achievable financial goals for the year ahead.

Last year’s expenses

How did you spend your money over the last year? Examine your bank statements and credit card bills, group your expenses into categories, and note areas where you spent more than planned. Identify any unexpected costs and consider how you could plan for similar situations in the future. This detailed assessment will provide you with clarity about how much money you actually need to sustain your lifestyle and help you make more informed spending decisions in 2024.

Last year’s budget

Evaluate the effectiveness of last year’s budget. Did you regularly overspend in certain categories? Were there areas where you consistently spent less than planned? Understanding these patterns will help you adjust your budget for the new year and align it with your actual spending habits and financial goals. And if you didn’t use a budget last year, don’t worry: completing this financial planning checklist will set you up to make one for 2024. 

Current assets and liabilities

List all your assets, including cash in bank accounts, investments, retirement savings, and any real estate equity. Then, detail your liabilities, such as credit card debt, a mortgage, student loans, and any other debt like auto or personal loans. Calculate your net worth by subtracting liabilities from assets to get a snapshot of your overall financial health.

Anticipated income

Estimate your expected income for the coming year. Start with your earnings from the previous year and adjust for any known changes, such as salary changes, bonuses, or changes in tax bracket. If you’re planning to pick up a side hustle, try to project how much it will bring in, being sure to account for additional taxes you’ll have to pay. This projection will be the foundation for your budgeting and financial plan for 2024.

Financial plan

Revisit your existing financial plan, if you have one, to see if it still reflects your current financial situation, lifestyle, and aspirations. Make adjustments as needed, considering both the coming year and your long-term financial goals. If you don’t have a financial plan, you’ll have everything you need to create one using the insights you develop as you move through your financial checklist. 

2. Check in on your emergency fund

An emergency fund is a dedicated savings account to cover unexpected expenses or financial emergencies, such as sudden medical bills or job loss. Regularly evaluating your emergency fund is important for ensuring you’ve saved enough to provide financial security in times of need and sustain you through unforeseen events without going into debt. 

Target savings

Make sure the target goal you’ve set for your emergency fund target still makes sense for your lifestyle. Have your income or expenses changed over the last year? If so, adjust your savings goal to reflect your current circumstances. While the whole point of an emergency fund is to cover unexpected costs, you can anticipate potential sources of emergencies and tuck money away from them. For instance, did you adopt a new pet, have a child, purchase a house, or buy a used car? Those are all potential sources of large expenses you can’t predict, so you might want to pad your emergency savings goal accordingly.

Current balance

How much money is in your emergency fund now? Is it enough to cover at least six months of living expenses if you were to lose your income? Did you spend money out of your emergency savings in 2023? Determine how much you’ll need to put aside each month in 2024 to build your fund up to your target goal. 

Account type

Where you store your savings can make a big impact on its growth. Take a look at the type of account where your emergency fund is kept. Is it in a regular savings account, a high-yield savings account, or a money market account? Review the interest rate you’re earning and explore options for better returns in 2024 so your emergency fund continues to grow effectively.

3. Assess your debt situation

Effectively managing your debt is a key step in your financial checklist. Paying off debt as soon as possible, and specifically prioritizing your high-interest debt first, can significantly reduce the total interest paid over time and free up financial resources for other goals. Focusing on debts with the highest interest rates not only lessens your overall financial burden but can also positively impact your credit score and overall financial wellness.

Credit card debt

List all your credit card balances, along with the interest rates and minimum monthly payments for each. This will help you understand the total debt and prioritize which balances to pay off first. If you have multiple cards with high-interest rates, you might research options for consolidating it all onto a card with a lower interest rate. However, be aware that there’s usually a fee to transfer balances, and you might not qualify for the lowest rates if your credit score isn’t excellent. And even if you can get a very low-interest rate, there are pitfalls: those introductory offers usually expire after a certain amount of time, and if you’re late on even one payment, you’ll likely lose the great rate.  

Auto and personal loans

Detail your auto and personal loans, including their interest rates and terms, and calculate the total interest you’ll pay over the life of these loans. Consider whether you could afford to pay more than the minimum each month to reduce your overall interest expense and help you become debt-free sooner. 

Student loan debt

Document all your student loans, noting their interest rates and repayment timelines. Look into any potential student loan relief programs or refinancing options that could help you pay them off faster. If your loans have been in forbearance or deferment during 2023, make sure you know when those relief plans end and your payments will resume.  

Mortgage

If you have a mortgage, review your current loan balance, equity, and interest rate. You might want to shop around for current refinancing interest rates to see if you could get a lower rate than what you’re paying now, but be aware that refinancing comes with costs that can add to your debt. You could also consider if there’s room in your budget to make extra principal payments in 2024. One simple way to do so is to pay your mortgage biweekly instead of monthly. With this approach, you pay half your mortgage payment every two weeks; because there are 52 weeks in a year, you wind up making the equivalent of one extra full monthly payment per year. 

Other debt

List out all your other debts, such as buy-now, pay-later plans or things you’re paying for in installments, like if the cost of your most recent cell phone is wrapped into your monthly bill. If you owe money to friends or family, make a note of it too. These debts, while they might be smaller, can add up and should be part of your overall debt management plan.

Debt payoff plans

Create a strategy for paying off high-interest debt. Consider methods like the debt avalanche or snowball approach. Focus on balances with high or variable interest rates first, like credit cards and personal loans. While it may be enticing to tackle larger debts like student loans and mortgages, they usually have lower rates than things like credit cards. Plus, remember that your mortgage interest can be a tax deduction. Paying off high-interest debts first can be more effective in reducing how much money you spend on interest overall. 

4. Inspect your insurance

Yes, insurance belongs on your financial planning checklist. Take time to examine your various insurance policies to see if they still align with your current and anticipated future needs. This ensures that you’re adequately protected while also identifying areas where you might be able to optimize coverage or reduce costs. 

Flexible spending account (FSA)

A flexible spending account (FSA) is a tax-advantaged account offered by some employers, which you can use to pay for specific healthcare expenses. It’s funded with pre-tax money, thereby reducing your taxable income. Typically, you have to use the funds in your FSA within the plan year, often by December 31, but some employers offer a grace period extending this deadline. If you have the option to contribute to an FSA through your employer, plan your 2024 contributions based on anticipated medical expenses so you can make sure to use this benefit effectively.

Health savings account (HSA)

A health savings account (HSA) is another tax-advantaged account offered by employers designed to help you save on medical expenses. Unlike an FSA, funds in an HSA roll over from year to year, so there’s no pressure to spend the balance within a specific timeframe. If you have any outstanding medical expenses from 2023, now is the time to submit them to your HSA for reimbursement. Looking ahead, consider your expected healthcare costs for 2024 to determine how much to contribute to your HSA and maximize its benefits.

Health insurance deductible

Be aware that health insurance deductibles typically reset at the beginning of the year. Know your deductible amount and budget for medical expenses you’ll need to cover until the deductible is met. Now’s also a good time to look over your health insurance plan so you know which costs are and aren’t subject to the deductible; for example, many plans don’t count preventative care or visits to your primary provider toward the deductible, so you just have to cover the copay.  

Disability and life insurance

Take a moment to review your disability and life insurance policies. Be sure you know the coverage details, who your beneficiary is, and the cost of premiums and deductibles. You might want to adjust your coverage based on how your life has changed since you took out the policy, such as the addition of a new family member or a change in income. Even if you’re not directly paying for a plan, your employer might provide one as part of your benefits package, and you’ll want to be aware of what it entails. 

Homeowners/renters insurance

Evaluate your homeowners or renters insurance coverage and verify that it’s sufficient to cover your current living situation and possessions. If you’ve made home improvements or purchased expensive items in the last year, you might need more coverage; conversely, if you’ve downsized you may want a less expensive plan. As 2024 approaches, it might be time to shop around for better rates or inquire about loyalty discounts and bundling options with your current provider.

Car insurance

Similarly, review your car insurance coverage and compare it to your current needs. For instance, if you were carrying full coverage because you’d financed your car and have now paid it off, you have the freedom to consider a lower tier of coverage if you want to save money. Look for opportunities to reduce rates or secure discounts; many insurance companies offer multi-policy discounts if you also buy your homeowners, renters, and/or life insurance policies from them.

5. Review your investment portfolio

Regularly examining your investment portfolio is an essential part of your annual financial planning checklist. This allows you to monitor the performance of your investments, ensuring they align with your financial goals and risk tolerance. Periodic check-ins also provide an opportunity to adjust your strategy in response to market changes or personal life events, so you can maintain a balanced investment strategy that supports your long-term financial plan.

Investment performance

Evaluate the performance of your various investments over the past year, comparing them against historical trends to identify any assets that are either underperforming or exceeding expectations. Remember to take the long view on your investment strategy. Avoid making hasty decisions based on short-term market dips; instead, consider the benefits of a buy-and-hold approach, which often yields better results over time. 

Asset allocation

Asset allocation refers to the way your investments are distributed across different asset classes, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Assess whether your portfolio’s allocation aligns with your goals, risk tolerance, and investment timeline. Different risk profiles require different balances of stocks, bonds, and other assets. For instance, a more aggressive profile might have a higher proportion of stocks for potential growth, while a conservative profile might lean more toward bonds for stability. As you get closer to retirement, it’s common to shift toward a more conservative approach. Regularly reviewing and adjusting your asset allocation helps keep your investment strategy on track with your evolving financial plan.

Rebalancing

If your portfolio’s asset allocation has shifted away from your target, it may be time to rebalance. This process involves moving funds among different investments to maintain the right mix for your strategy across various asset types, sectors, and industries. Rebalancing your portfolio can also help make sure your portfolio remains diversified to reduce risk.  

6. Check your credit score

Your credit score is vital to your financial health because it influences the interest rates you receive on mortgages, car loans, and credit cards. Even if taking out loans or lines of credit isn’t in your 2024 financial plan, checking your score still belongs on your financial checklist; your credit score can affect your insurance rates, ability to rent an apartment, and how much of a deposit is required when you sign up for utilities. In some cases, it may even be considered by employers when you apply for a job. Regularly checking your credit reports is essential to ensure accuracy and to safeguard against identity theft or errors. 

Credit reports

The three major credit reporting agencies (Equifax, Experian, and TransUnion) each provide a free credit report annually; all you have to do is request it. A credit report details your credit history, while your credit score is a numerical representation of your creditworthiness based on that history. Note that your credit reports won’t necessarily tell you your credit score, but your bank or credit card issuer might provide that information free of charge.

Credit report accuracy 

Your reports will show activity like the loans and credit cards you have, the times when creditors have checked your credit, any late payments or accounts that have been sent to collections, and legal activity like whether you’ve been sued, arrested, or filed for bankruptcy. Make sure everything on your report from each agency is accurate. If you see activity that’s incorrect, it may be a sign of fraud or identity theft, and you’ll want to contact the credit reporting agency right away to get errors rectified so they don’t undermine your credit score.

Credit score improvement plans

Credit scores are categorized as follows: poor (300-579), fair (580-669), good (670-739), very good (740-799), and excellent (800-850). If your score falls into one of the three lower tiers, you might want to put raising your credit score on your 2024 financial plan. There are a number of steps you can take, like being sure to pay all bills on time, reducing debt levels, avoiding new credit inquiries, and correcting any inaccuracies on your credit reports. By setting up payment reminders, budgeting to pay down existing debts, and regularly reviewing your credit reports for errors, you can gradually improve your credit score, which may lead to better loan terms and interest rates in the future.

7. Get ready for tax time

April will be here before you know it; prepping for tax season early reduces the stress of a last-minute rush and ensures a smooth filing process. Get started now by making a list of all the income documents you expect to receive. Look over your 2023 spending to identify any potential deductions or credits. If you anticipate owing taxes, early preparation gives you time to budget for the payment. Being proactive with your tax planning can also help identify opportunities for tax savings and ensure compliance with tax laws.

Charitable contributions

Reflect on any charitable donations you made in 2023, as these can potentially be deducted from your taxes if you choose to itemize deductions. It’s important to note that for these contributions to be eligible for tax deductions, they must be made to qualified 501(c)(3) organizations. You may need documentation for each donation when filing your taxes and claiming the deductions, so track down your receipts. 

Student loan interest

If you’ve been paying interest on student loans, you might be eligible to deduct this expense on your taxes. To take advantage of this deduction, gather all relevant documentation, such as statements or 1098-E forms from your loan servicer, which detail the amount of interest paid over the year. Unlike many other tax deductions, you don’t have to itemize deductions to claim this deduction. 

Mortgage interest

The interest you pay as part of your mortgage payments may also be tax deductible if you itemize deductions. Your mortgage servicer should furnish you with a 1098 form detailing how much you spent on interest last year. This deduction can reduce your taxable income, potentially leading to significant tax savings.

W2s and 1099s

W2s and 1099s are both tax forms, but they have a few key differences. W2 forms are issued by employers, and detail wages and taxes withheld for employees. 1099 forms, on the other hand, are given to independent contractors or freelancers and report income without tax withholdings. These forms, which you should receive by the end of January, are essential for determining your total income and taxes paid in 2023. If you have both employment and contract income, you’ll want to combine the information from W2s and 1099s to accurately assess your total tax liability. Remember, since taxes aren’t typically withheld from 1099 income, you may need to account for additional taxes owed.

Interest and capital gains earnings

Money you earn from investments is taxable, though different rates may apply for interest, dividends, and capital gains. You should expect to receive forms such as 1099-INT for interest earned from accounts like savings or CDs, and 1099-DIV or 1099-B for capital gains from investments. These forms, typically sent by banks and brokerage firms, detail the amount of taxable interest and capital gains earned in the year. Inspect these documents closely, possibly with your financial advisor, to accurately estimate your tax liability.

8. Revisit your retirement plans

A lot can change in a year, so be sure to reassess whether your retirement plan still aligns with any life changes you’ve experienced or anticipate, such as starting a family, shifts in income, or adjustments in your target retirement age. These changes can significantly impact how much you need to save and the strategies you use to reach your retirement goals.

Retirement accounts

Reviewing your retirement accounts is a core component of your financial planning checklist. Be sure to check on all of your accounts if you have more than one, including 401(k)s, 403(b)s, and individual retirement accounts (IRAs), across different employers or financial institutions. This will give you a clear understanding of where your money is invested and how each account is performing. You might also consider rolling over old 401(k)s or 403(b)s into an IRA, which can simplify your retirement savings and potentially offer more investment choices. 

Employer plans

Now is the ideal time to take a look at your employer-sponsored retirement plans, such as 401(k)s or 403(b)s, to ensure you’re maximizing their benefits. If possible aim to contribute at least enough to receive the full company match, as this is essentially free money that enhances your retirement savings. When deciding how much to contribute, be aware of the contribution limits for 2024, as the caps usually change annually. Contributing as much as you can within these limits not only boosts your retirement fund but also offers tax advantages. If your financial situation allows, consider increasing your contributions in 2024 to further build your retirement savings.

Additional IRA contributions

If you have a traditional or Roth IRA and have not met the contribution limit yet, you can make contributions for the 2023 tax year until April 15, 2024. For the 2023 tax year, the IRA contribution limits are $6,500 for those under the age of 50 and $7,500 for those above. For 2024 contributions, the IRS increased these limits to $7,000 for those under the age of 50 and $8,000 for those above. Unlike traditional IRAs, Roth IRAs have reduced contribution limits based on filing status and income, so do your research to be sure you don’t exceed them. Maxing out your traditional IRA contributions can not only enhance your retirement savings, but may also provide tax benefits if you can deduct your contributions from your taxable income. 

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Target timeline and goal

Completing your financial planning checklist involves reflecting on more than just money; how you want to live your life long-term is part and parcel of the process. Reflect on when you’re hoping to retire, whether that’s in the far-flung future or around the corner, and how much money you’ll need to make it happen. Take a look at your current retirement savings and planned contributions, then calculate if you’ll have enough to retire at your target age. You might also want to estimate how much social security income you’ll receive. This is where financial planning and life planning come together. Are you on track to have the funds to retire at your desired age? If not, you’ll need to either increase your retirement savings or extend the time you’ll remain in the workforce. Doing this exercise annually is an important part of maintaining a realistic financial plan, as your target retirement timeline and savings goals can change due to shifts in your career, family circumstances, and many other factors. 

9. Consider family and estate planning

Changes in your family and estate throughout the year can affect your financial needs and goals. Whether it’s the arrival of new family members, a marriage or divorce, or adjustments in your long-term plans, each of these factors can influence your financial strategy. Annual reviews help to align your financial planning with your current life situation and future aspirations.

Family size and dependents

Consider any changes in your family’s size and your dependents. Your family may be growing, whether you’re welcoming a new child, planning for one, or anticipating the need to support relatives. Or perhaps your household has gotten smaller due to a change in marital status or children moving out. These changes can significantly impact your personal finances and tax filing status, so they necessitate shifts in both your day-to-day budget and long-term financial goals. 

Education costs for children

Now is an opportune moment to think about whether you want to start saving for your children’s future education costs, whether you already have kids or are planning to have them, or if you want to support young relatives with their college costs. Even with the help of financial aid, tuition costs can be a big burden. Investment vehicles like 529 plans or Coverdell Education Savings Accounts offer tax advantages and are specifically designed for education savings. These accounts allow your contributions to grow tax-free, provided the funds are used for qualified educational expenses. Starting early on these savings can greatly ease the financial burden of higher education in the future.

Insurance beneficiaries

This is a heavy but important part of personal finance planning: do you know who will receive insurance benefits in the case of your death? If you haven’t checked your policy in a while, or if you haven’t paid attention to the policy offered by your employer, now’s the time to check. Be sure to review your life insurance as well as any other policies that come with survivor benefits, such as annuities or pensions. Keeping this information up to date ensures that your insurance benefits will be directed according to your current wishes and provides peace of mind that your loved ones will be taken care of.

Your estate

Estate planning may sound like a grandiose endeavor for wealthy people, but it’s actually a valuable part of anyone’s financial planning checklist. Regardless of your age or net worth, making a plan for your estate ensures that your loved ones are informed and prepared to handle your assets in the event of your passing. This involves documenting all pertinent information about your assets, including bank and investment accounts, insurance policies, real estate holdings, as well as any debts like a mortgage, loans, and credit cards. It may be helpful to work with a financial planner to organize this information and store it in a single, accessible location. This can significantly ease the process for your family or executors. Additionally, consider legal instruments like an advance medical directive or a durable power of attorney. Bonus: having this information in one place also comes in handy when you update your financial plan in the future.  

10. Set financial goals

The whole point of your financial planning checklist is to help you attain the things you really want in life. As you look ahead to next year and beyond, define your financial goals and strategize how to save for them. Revisit goals you’ve set in the past and make adjustments as needed. A career shift, a change in family dynamics, or evolving personal ambitions can all influence your financial priorities, so update or set new goals that reflect what matters most to you now. This is your chance to dream big and make a plan to turn those aspirations into reality. 

Short-term financial goals

Short-term financial goals are objectives you aim to reach within a relatively brief period, typically about a year. You might want to save up for a vacation, a major purchase like a new appliance, or a big event like a wedding. Consider setting up a sinking fund in a dedicated savings account to stash money so you don’t accidentally spend it. In addition to tangible savings targets, consider setting short-term goals for financial health habits too, like sticking to a budget, reducing impulse spending, or implementing money-saving tips.  

Mid-term financial goals

Mid-term financial goals typically take up to five years to achieve. These might include saving for a down payment on a home, funding a big home renovation, or accumulating capital to start a small business. For these types of goals, you might want to put your savings to work earning returns with low-risk investments. For example, you might put some money into an FDIC-insured high-yield savings account or certificate of deposit, and invest some of your funds in Treasury bills or notes.

Long-term financial goals

Long-term financial goals are those you aim to achieve more than five years into the future. These often include saving for retirement, funding your children’s college education, or paying off a mortgage. Achieving these goals usually requires a combination of disciplined saving and strategic investing. For instance, contributing regularly to a retirement account and investing in a diversified portfolio can help build wealth over time and outpace inflation. Consider working with a financial advisor to help you clarify and align your current strategy with your future goals; the more specific you can make your goals, the easier it can be to stick to your saving and investing strategy over the long haul.  

11. Prepare your 2024 budget

With the comprehensive components of your personal finances you’ve gathered in the previous steps of your financial checklist, you’re well-equipped to lay out a detailed budget for 2024. Whether you’re new to budgeting or have it down pat, you might want to explore different budgeting methods, like the 50/30/20 rule, envelope budgeting, or a zero-based budget. Whichever approach you take, you’ll need to determine your take-home income, plan out your expenses, and incorporate your saving and investing plans.  

Income

Start by getting a handle on how much money you’ll have to live on each month. This includes not only your regular salary or wages after taxes and other deductions, but also any additional sources of income you might have. These could be earnings from part-time work or freelance projects, rental income, spousal or child support, benefits from government programs, or dividend payments from stocks. If you anticipate any windfalls, like a tax return, bonus, or large financial gift, incorporate this into your budget too; you might want to use it to fund a financial goal or knock out some debt. 

Expenses

Next, categorize your expected expenses based on your spending patterns from 2023 and any anticipated changes for the upcoming year. Break your expenses into fixed, variable, and infrequent categories. Fixed expenses include regular payments such as rent or mortgage, utilities, insurance premiums, and loan repayments. Variable expenses, which can fluctuate, might consist of groceries, entertainment, dining out, and gas. Don’t forget to account for infrequent expenses, like annual subscriptions, car maintenance, or holiday spending, which can upend your budget if not planned for. 

Savings and investing

Integrating regular saving and investing into your monthly budget is key to achieving the financial goals you’ve identified. You might start by determining a specific percentage or amount of your monthly income to allocate towards savings and investments. This could be guided by goals such as building an emergency fund, saving for a down payment, or contributing to a retirement account. For savings, consider setting up automatic transfers to a dedicated savings account right after you receive your paycheck. For investing, consider making regular contributions to a diversified investment portfolio or retirement accounts; you may be able to automate those contributions too. 

Ongoing tracking

The best budget is one you can stick to. That calls for flexibility to accommodate life’s inevitable curveballs and ongoing tracking to adjust as needed. Set yourself up with the tools you need to stay on top of your budget, whether that’s a budgeting app to track your spending, automated budgeting tools in your online bank account, or just a good old-fashioned spreadsheet. And put a recurring appointment on your calendar to balance your budget every week or two. Your financial checklist is about setting yourself up for big-picture success, but ongoing attention to your personal finances is what will keep you on track with your plans. 

Your financial planning checklist: an empowering start to the new year

It can feel refreshing, and even exciting, to kick off the new year with a solid plan for your personal finances. From managing debt and spending to optimizing your saving and investment strategies, each step is an opportunity to enhance your financial well-being and enjoy the feeling of confidence that comes with managing your money. Completing your financial checklist empowers you with the insights you need to navigate both the coming year and your long-term financial journey. And if investing is part of your 2024 financial plan, Stash makes it easy to get started, helping you achieve your financial goals and paving the path to a better future.

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Celebrating Financial Wellness Month can be an empowering and enjoyable journey toward greater financial stability. So pick a few items from the list below and kick off your new year with a party where the guest of honor is your financial freedom. 

9 ways to celebrate Financial Wellness Month:

1. Take stock of your emergency fund
2. Check your credit report
3. Review your retirement plans
4. Tackle your credit card debt
5. Evaluate your student loan options
6. Set saving and investing goals 
7. Review and rebalance your investment portfolio
8. Build your 2024 budget
9. Increase your financial literacy

1. Take stock of your emergency fund

Your emergency fund acts as your lifeline when unexpected events inevitably happen, so its health is critical to your financial wellness. Give it a check-up with these steps:

• Assess your current balance: Your fund should have enough for at least six months of living expenses in case you lose your income or have a major unexpected expense. 
• Adjust goals: Tweak your target savings goal to reflect your current needs if your lifestyle or expenses have evolved in the last year. 
• Replenish savings: If you spent money from your emergency fund last year, plan to build it back up in the coming months.
• Seek better rates: Keeping your money in a high-yield savings account or money market account helps your emergency savings grow faster with interest; shop around to see if you could get a better rate at a different bank or credit union. 

2. Check on your credit 

Your credit influences multiple aspects of your life, including loan rates, rental opportunities, insurance premiums, and even employment. So what better time to look into your credit report and score than Financial Wellness Month? 

Your credit report is a detailed record of your credit history, while your credit score is a numerical reflection of your creditworthiness. Monitoring both can help you keep track of your financial standing, recognize signs of identity theft, and find opportunities to improve your credit. You’re entitled to one free credit report per year from each of the three reporting agencies, and you can usually get your credit score from your bank or credit card issuer. 

3. Review your retirement plans

You’re likely hoping to enjoy your retirement party some point in the future. Make sure you’ll have the money you need by throwing yourself a retirement planning party for Financial Wellness Month. Include these activities in your financial festivities:

• Account overview: Start by examining all your retirement accounts, including 401(k)s, 403(b)s, and IRAs. Be sure you know about all the accounts you have, what institution manages them, and the balances in each. You might also want to estimate your future social security benefits, which play a crucial role in budgeting during retirement.
• Retirement calculator: Whether retirement is four years away or forty, you need to know how much money you’ll need when the time comes. Use a retirement calculator to find out how much you need to be investing every month in order to leave the workforce with enough to live on. 
• Up your retirement contributions: If your employer matches a portion of your 401(k) contributions, don’t leave that money on the table. Bump up your contributions to at least the full amount that your company matches. And if you have an IRA, you have until April 15, 2024 to make contributions for the 2023 tax year; consider adding to your account if you haven’t yet met the contribution limits. 

4. Tackle your credit card debt

The sooner you get out of debt, the sooner you can start earning interest instead of paying it. High-interest debt can quickly mount to daunting proportions, adding stress and pinching your budget. So it’s particularly important to pay this type of balance off as soon as possible. 

For Financial Wellness Month, take yourself on a metaphorical trip to the mountains by choosing one of these popular debt-payoff strategies:

• The avalanche method: This approach involves paying off the debt with the highest interest rate first while making minimum payments on other debts. Once the highest interest debt is paid off, you move on to the next highest, and so on. This can reduce the total amount of interest you pay over the long haul.
• The snowball method: Instead of prioritizing by interest rate, the snowball method focuses on paying off the smallest balance first while making minimum payments on the rest. After the smallest debt is cleared, you move on to the next smallest. This approach provides a sense of accomplishment with each debt you eliminate, giving you motivation to stick with your debt-payoff plans.

5. Evaluate your student loan options

If student loan debt is weighing you down, making a bigger dent in it can increase your sense of financial freedom. This Financial Wellness Month, take a look at ways to pay off your student loans faster:

• Extra payments: One straightforward approach is to make extra payments on your principal balance. This reduces the overall amount owed and shortens the loan term. Even small additional amounts can make a big difference over time.
• Refinancing: Refinancing your student loans may lead to lower interest rates and potentially lower monthly payments. But be aware of the downsides: you might give up some debt-relief options, and there may be fees involved.
• Loan forgiveness programs: If you work in certain sectors, you might qualify for federal student loan forgiveness programs. Some teachers, medical professionals, government workers, and nonprofit employees can have some or all of their student loan debt forgiven after meeting certain criteria. If your career ambitions are leading you toward those fields, take a look at whether you might qualify for forgiveness. 
• Consolidation: Consolidating multiple student loans into one can simplify your payments and sometimes lower your interest rate, which can make it easier to manage your debt and repay it faster. Just like refinancing, though, there’s a chance you’ll have to pay fees and might disqualify yourself from forbearance, deferment, and forgiveness programs. 

6. Set saving and investing goals 

What’s the real meaning of Financial Wellness Month? It’s more than just crunching numbers; financial health is all about helping you attain the things you really want in life. And to do that, you’ll need to set clear financial goals. This is your chance to envision what you want to achieve in the near and far term, then make a plan to turn those dreams into reality. 

Settle in for a goal-setting sesh; grab some colorful paper and pens for extra merriment. Jot down your goals and group them into three categories:

• Short-term goals (within one year): Saving for a big trip, building a solid emergency fund, planning a wedding without going into debt… your short-term goals can be practical, fun, or both. Once you decide what you’re saving for, set up sinking funds and store your money in an interest-bearing account to help it grow. 
• Mid-term goals (within five years): Common mid-term savings goals include a down payment on a house, buying a new car, or starting a small business. Consider using high-yield savings or money market accounts, which tend to offer higher interest rates than regular savings accounts while keeping your money easily accessible.
• Long-term goals (more than five years): These are typically retirement or long-term wealth accumulation goals, and they’re often for things decades into the future. Investing, whether through a brokerage account or retirement accounts, can help you work toward these bigger objectives. The longer time horizon lets you take advantage of compound returns and helps balance out the risk of stock market volatility. 

7. Review and rebalance your investment portfolio

Investing for the long term doesn’t mean you shouldn’t keep tabs on your portfolio’s performance. Over time, changes in the market can shift how different assets weigh in your investment portfolio. Periodically checking your investments allows you to assess whether they still match your needs and goals. Consider the following factors:

• Asset allocation: Balance your investments across different asset classes like stocks, bonds, and funds, based on your goals, risk tolerance, and investment horizon.
• Portfolio rebalancing: Adjust your portfolio’s asset proportions to maintain your original allocation or adjust it if your risk profile has changed. If one type of asset has grown proportionately too large, you might sell some of that asset and buy more of another.
• Diversification: Diversifying your assets, or spreading investments across various classes, sectors, and industries, reduces the risk that a downturn in a single stock, sector, or market will significantly impact your overall portfolio.

8. Build your 2024 budget

Whether you’re an old hand at financial planning or are just getting started, creating a budget is a classic Financial Wellness Month activity. Take time to reflect on last year’s spending while it’s still fresh in your memory, making it easier to plan accurately for 2024. 

• Analyze past spending: Review your 2023 expenses to identify spending patterns. This analysis will help you forecast your regular monthly expenses for the new year, plus alert you to expenses that caught you by surprise last year so you can plan for them this time around.
• Categorize expenses: Divide your expenses into categories that make sense to you, such as housing, utilities, groceries, transportation, entertainment, etc. Don’t forget to include infrequent expenses like annual subscriptions or insurance premiums, as well as consider things with variable costs like gas and dining out.
• Plan for savings and investments: Based on your financial goals, allocate a portion of your monthly budget to savings and investments. Whether it’s for an emergency fund, a down payment on a house, or retirement, regular contributions to these goals are crucial for achieving your bigger ambitions.
• Test drive some budgeting strategies: At its core, a budget is a plan for how you’ll spend your income each month. But putting that into practice is easier if you have a solid strategy. Try one or more of these popular budget approaches to see which makes the most sense for you: the 50/30/20 rule, envelope budgeting, or a zero-based budget.
  

9. Increase your financial literacy

They say knowledge is power, and Financial Wellness Month is a perfect time to power up your financial literacy. Dive into the world of finance by reading books or articles on financial topics, attending workshops or webinars, following reputable financial bloggers or podcasters, or even taking a financial literacy course. By embracing your financial education, you can increase your confidence and knock out financial stress.

Pave a prosperous future during Financial Wellness Month

However you celebrate, this month can be a catalyst for continued growth and achievement in your financial journey. Each step you take is a stride toward a more secure and prosperous financial future. And don’t forget, you’re celebrating Financial Wellness Month; give yourself a high-five for the progress you’ve already made and put a line item in your budget to treat yourself a bit for taking steps toward greater financial health. 

And remember to keep the party going all year long by keeping up with your monthly budgeting, debt management, saving, and investing plans. After all, National Financial Awareness Day is on August 14, 2024, so you’ll want to be prepared for your next financial wellness celebration.  

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Like any sort of job, side hustles come in all kinds of shapes and sizes, potential incomes, costs, and time investments. Some are quick, low-effort, and tend to generate less money. Others can be built into real money-makers, but require some up-front investment or additional time and effort. 

In this article we’ll cover:

• What a side hustle is
• Types of side hustles
• Side hustle ideas
• How a side hustle can help you grow your wealth
• Tax implications of side hustles

What is a side hustle?

A side hustle is work that provides supplementary income in addition to the money earned through one’s main job. Essentially, a side hustle is a second (or third, or fourth) job. Side hustles can include anything from gig work, like driving for Uber or Amazon Flex, to flipping houses or furniture, to freelancing using your professional skills. 

Many people with side hustles use the internet, apps, or their professional networks to find opportunities; some go so far as to build small businesses around their side work. The amount of work and potential income earned through your side hustle will depend on what type of work you pursue and how much time you can devote to it.

What is a “legitimate” side hustle? 

A legitimate side hustle is one where you provide the product or service required and can trust that you’ll get paid what you expect. There are many scammers on the internet, though, and it isn’t surprising that they sometimes target those looking for side hustles. Keep an eye out and stay safe while looking for side hustles to protect your time, income, and personal information. If an opportunity seems too good to be true, it likely is. Here are a few tips for checking the legitimacy of a money-making opportunity:

• Screen potential freelance or contract work clients to ensure they’re legitimate businesses. Get a contract in place if possible. 
• Look at reviews and web forums for any apps or websites you’re using to find work. 
• Never pay a fee to apply to work for an individual or company.
• Beware of opportunities that require you to purchase products upfront to resell to others or require you to invest money in training materials. Multi-level marketing schemes (MLMs) often require this, and many people lose money or go into debt with these types of endeavors. 
• Guard your personal information. Review a company’s website, check the Better Business Bureau, and talk to someone directly before providing anyone with your personal information.

Types of side hustles

Side hustles aren’t one-size-fits-all. You can choose from different types that require varying levels of time and effort, upfront costs, and skill requirements. 

Here are five broad categories to consider:

• Freelance or contract work: This work requires an existing level of skill, and many people use the professional skills they rely on for their primary job to pick up freelance work in the same industry. 
• Gig economy jobs: Gigs are temporary and part-time positions in which independent contractors fulfill some services provided by a company, such as making deliveries for a food-delivery service.
• Online side hustles: Online side hustles are generally not jobs so much as tasks. Online roles are generally quick, easy, and attainable, but relatively low-paying.
• Small businesses: Some hustlers turn their side work into small businesses, whether that’s selling a skill or a product. These roles are often more time- and cost-intensive, but consist of building a brand and potentially turning their small business into their main job.
• Passive income: Passive income can come in several different forms but generally consists of investing in something or renting something out, resulting in repeating income that requires little ongoing effort. There may be a fair amount of work up-front, but the goal is to earn a regular income once set up.

Side hustles ideas for 2024

Based on the types of sides hustles we covered, here 29 hustles to consider broken into the following categories:

• Freelance/contract side hustle ideas
• Gig economy side hustle ideas
• Online side hustle ideas
• Small business side hustle ideas
• Passive income side hustle ideas

Freelance/contract side hustle ideas

Generally, these side hustles are hourly or project-based and require some level of skill or expertise. Freelance and contract work can be found through numerous apps like Fiverr, Upwork, Steady App, and many more. You might also find these opportunities through your network, family, and friends, or by building a public or industry reputation. 

Freelance and contract work require an investment in your own expertise, and your income generally depends on the amount of time you put into the work and your experience level. When pursuing these side hustles, make sure the work you do doesn’t breach a non-compete agreement you might have with your main employer. Some examples of freelance work include: 

• Handywork/landscaping
• Writing
• Graphic design
• Bookkeeping
• Editing
• Website development
• Social media
• Tutoring
• Administrative work

Gig economy side hustle ideas

Gig work is a specific type of contract work based on flexible, temporary, or freelance jobs generally managed online or through an app. In the gig economy, everyone is an independent contractor, so people generally don’t have regular schedules or get benefits from employers. Instead, you get the flexibility to work when you want to. 

Pet sitting or dog walking

If you’re an animal lover, you can find opportunities to take care of pets for some extra cash. The amount of time and potential income is dependent on how much work you take on, where you live, and the reputation you build. 

House sitting 

If you like to travel, house sitting might be a good fit for you. Using websites dedicated to sourcing house sitters, you can find opportunities to make some money in exchange for staying at someone’s home, watering their plants, grabbing their mail, and other domestic tasks. House sitting comes with the side benefit of helping with your travel budget since your accommodations are free. You might also find opportunities where you live if you’re interested in this kind of work but don’t want to travel.

Ridesharing

Rideshare driving is a popular side hustle these days. You’ll need to have a relatively new car in good condition, as well as a good driving record. Some people enjoy the chance to travel around the city and meet new people, as well as the chance to earn more money through tips. 

Delivering food through apps

You’ll need reliable transportation to pick up gigs delivering food; most people rely on a car, but some deliver by bike. You’ll usually earn money for each delivery in the form of payment from the company and tips from customers.

Delivering packages

Amazon and other businesses hire flex drivers in hour blocks to deliver packages. If you have three to five hours free, you can sign up for a flex block, pick up packages, and deliver them in your area. 

Online side hustle ideas

Unlike most gig work, online side hustles can usually be done from home. These jobs often require a lower time investment, with a wide range of potential incomes. 

Participating in online surveys

Market research companies often pay participants to share their thoughts, opinions, and experiences. With these websites, you’ll take surveys in exchange for a small amount of money. The more surveys you take, the higher your income. Watch out for potential scams, such as websites that require payment to join their panel of participants; check reviews before signing up to be sure the website is reputable. 

Participating in user testing

You can also test apps, websites, or platforms. Testers are often asked to click through a mockup of a website or sort cards so web developers can learn more about user behavior. These can earn more income than surveys on a per-task basis, but generally require a higher time investment. 

Transcribing videos, calls, or recordings

Some sites hire transcribers to turn audio recordings into text. Those who can transcribe quickly can earn a fair amount of money this way, as you’re often paid per audio minute or per file.

Virtual assistant

Many businesses need some help but don’t need a full-time executive assistant. That’s where a virtual assistant comes in. Often managed completely online, a virtual assistant can perform executive assistant-type tasks contractually. 

Starting a podcast, social media, or YouTube channel

Are you an expert on something, or do you have something you’re passionate about? Viral social media content comes in many forms, and if you can build an audience and you’re good at it, you may be able to generate income from a podcast or social media. It can take time to build a large enough audience to monetize your endeavor, but the effort can also be fun and rewarding in its own right. 

Selling used clothes or items

Those who are good at thrifting or garage sales can often find items at a relatively low price and resell them for a higher price via online marketplaces. The amount of income you can earn varies widely, but you could do well if you’re knowledgeable about niche items that have a high value on the secondary market. It’s possible to get started without investing too much money upfront if you can find good deals on used items; you could even start by selling items you own but no longer want. 

Small business side hustle ideas

A small business is your opportunity to create a brand and sell something you’re good at, whether that’s a product or a service. These are often high-effort, higher-potential income opportunities. 

Selling crafts or art

Do you draw, paint, work with wood, or otherwise create a physical product? These products can be sold at fairs, markets, shows, and through online marketplaces to make some money. Work like this requires some up-front budgeting for materials, websites, booths, or other business investments, as well as the time required to create things to sell. But building a brand can turn your side hustle into your full-time hustle. 

Refurbishing furniture

Another small business opportunity is refurbishing and reselling furniture. With the right supplies, you can update or fix up old or damaged furniture found online, through garage sales, or even on the street for some extra income. This takes an investment in skills and supplies, as well as the time to dig up good finds you can restore. 

Creating and selling art

Art doesn’t have to be physical to sell. If you have skills with platforms like Photoshop, you can create original digital art you can sell online. Because it doesn’t require physical supplies, this can be less expensive than physical art. Many people take commissions to increase opportunities to make money.   

Coaching or teaching classes

If you have expertise in something, you can share your expertise by offering online classes, either through your own website or an online platform. This avenue can also provide repeatable income if you sell the same recorded course many times.

Passive income side hustle ideas

Passive income is different than active income. Broadly, this is income that you can generate without requiring daily participation. While passive income usually requires an initial investment, you may be able to earn dividends for years from that investment. Check out our full breakdown of passive income opportunities. 

Renting

Whether you’re renting a spare room in your home or you’ve invested in a rental property, you can generate regular and predictable extra income monthly. Investing in rental properties will often require a hefty investment, so spend time researching options and budgeting before making such a significant decision. 

Renting out your car

All this requires is having a car and not needing it while it’s being rented out. There are platforms dedicated to these types of rentals and a significant time investment isn’t usually involved. 

Affiliate marketing

Affiliate marketing requires an audience, but once you have one, you can promote content through blogs, videos, or social media and collect ongoing income from your audience’s purchases.

Investing in bonds

While this isn’t exactly a side hustle, it’s an opportunity for passive income that some people overlook. Investing in bonds is a relatively low-risk way to use the savings you have to get a guaranteed return, and there are long and short-term bonds available to fit your timeline. 

Opening a high-yield savings account or CD

While they also aren’t side hustles, both high-yield savings accounts and CDs are ways you can use your existing savings to make more money. Both of these accounts offer short-term opportunities to earn interest for storing your cash.

How side hustles can help your financial health

What you do with the money you make from your side hustle is dependent on your unique financial journey. It can help you balance your budget, put money aside toward retirement, or save up to buy something you really want. Relying on side hustles to pay your monthly bills can be risky because they often don’t guarantee consistent income, but a side hustle can help you: 

• Build an emergency fund
• Save more toward your goals
• Pay down debt
• Invest in the stock market
• Build your retirement account
• Treat yourself

Tax implications of side hustles

Remember, any income you make has implications for your taxes. Many first-time contractors and side hustlers find themselves shocked when they realize at the end of the year that they have to pay taxes on that income. Unlike money from your regular paycheck, taxes aren’t withheld from the money you make through a side hustle. You’ll have to pay state and federal income tax, and may also be responsible for self-employment taxes.  It’s important to research what your taxes are expected to look like and be prepared. You may be able to defer taxes on self-employment income with an IRA. 

How to choose the best side hustle for you

Here are some questions to consider when selecting the best side hustle for your unique situation.  

• What existing skills and experience do you have?
• How much time can you put into this work?
• How much income do you need to make from a side hustle? 
• What resources do you already have available?
• What opportunities would bring you the most joy?

Remember that side hustles don’t have to be huge commitments. You can try something to see if you like it before investing a lot of money or time.

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