It never hurts to have income streams other than the one that comes from your full-time job. One way to do this is to have a part-time, home-based business.
Here are seven ways having a part-time, home-based business can boost your finances:
1. Extra Income
The main reason most people have their own business is to accumulate extra income. Having more money means you have more financial security. Even income generated in your spare time means you have more breathing space in your budget.
This could lead to having money for a good vacation versus a mediocre one, or it may mean being able to have a vacation at all. Regardless, owners of a home-based part-time business will be able to put their extra income toward whichever expense they want.
Running a business can be fun, especially if you have a full-time job you do not enjoy.
Many years ago, I had a good friend that worked in a job that made him miserable. To get his mind off his job, which he desperately needed for the money, he did landscaping on the weekends. He loved landscaping and became very good at it. As a result, he kept getting referrals due to his excellent work, and in his first year of doing it part-time on the weekends he earned $60,000. This enjoyment blossomed into a six-figure business and he ultimately quit his full-time job.
The bottom line is make sure you are truly enjoying your business. That passion can go a long way. (For related reading, see: Three Ways to Make Money off Your Hobby.)
3. Tax Benefits
Taxes are one of the largest expenses in a typical American family’s budget. Many people are surprised at how much they pay in taxes when they drill down and see what they actually pay: federal income taxes, state income taxes, sales tax and so on. If you lower your overall expenses, including taxes, you will have more money for more desirable expenditures such as vacations or retirement savings.
If you could reduce the taxes you pay by even as little as $500 or $1,000 per year, that capital could easily add another six figures to your retirement nest egg at the tail-end of your working years. For most people working a W-2 job, there is not a plethora of tax benefits and tax reduction strategies available, even with a sharp tax person on your team.
Here is where a home-based business becomes very valuable. When you run a business from home, you have the power to qualify for a tax-deductible home office. When you are running a business, you can write off the business use of your car, telephone, computer and business-related meals. The tax deductions available are plentiful and numerous.
Talk to your tax person about the tax benefits of a home business, they could be worth thousands to you. (For related reading, see: Top 10 Home Business Tax Tips.)
4. Build Long-Term Wealth
A frequent complaint of those who are working hard to set aside funds for their retirement is traditional and Roth IRAs don’t allow them to put more money in because of the funding limitations. This leads to another spectacular reason to have an at-home business, even part-time.
When you own and run your own business, you can open your own retirement plan. You can launch your own 401(k) plan or a simplified employee pension (SEP). The SEP allows you to contribute up to 25% of your net business income up to a maximum of $55,000 (for tax year 2018).
By having an at-home business, you can have a powerful tax-advantaged way to invest more money for your retirement years.
5. Have a Profitable Asset You Can Sell Later
After you’ve gone through the time, effort and cost of launching a successful, income-producing business, don’t end your business because you are retiring or don’t feel like running it anymore. Consider selling the business and earning a large capital gain.
A business idea can be given away for nothing, but a business that has customers and profits can be sold for a tremendous amount. Imagine selling your business later on for $50,000, $100,000, $1,000,000, or possibly more. Businesses are bought and sold every day, and one day it could be you. (For related reading, see: 5 Reasons Small Business Owners Sell Their Companies.)
Just like you need to be diversified in your investments, you should be diversified in your active wealth-building pursuits as well. A part-time business helps you to diversify your sources of income. If your only source of active money-making is a job, what happens when you lose your job? What if the company closes? What if you end up hating your job or your boss? Having a part-time business adds safety to your job situation, especially if the economy turns sour or your company starts looking shaky.
A part-time business is a great way to get diversified in your active wealth-building pursuits.
7. Understand Economics
When you run a business, even a relatively simple home business in your spare time, you learn about economics. You learn about sales, profits, customer service, market research, consumer behavior, financial statements, pricing strategies and more. A small business is a microcosm of what large businesses and economies do every day to produce goods and services for a demanding populace.
The more all of us understand basic economics, the better choices we will make at the voting booth and on economic policies for the entire country.
Starting and running a part-time, at-home business might sound like a huge undertaking, but if you focus your business around something you are passionate about and utilize it properly, the financial benefits are well worth the effort.
(For related reading, see: Starting a Small Business.)