With a cost-of-living crisis squeezing consumers, household budgets have been hit this year. Higher interest rates, above-target inflation and eye-watering energy bills have left many households struggling. Thus, millions of us are supplementing our salaries with a second income.
Second incomes and side hustles
When the economy booms, fewer people tend to seek out second jobs, extra part-time work, and other money-making schemes. When times are hard, as they are now, more of us look for side hustles to boost our finances.
Popular side hustles in my area include babysitting, dog walking, online tutoring, food-delivery driving, and other gig work. But as an older man (I’m 56 soon), my goal is to ease back on hard work, not take on more. So how do I make more money with little extra effort?
How I’m enhancing my earnings
For the first 15 years of my career, I worked in the financial sector. Since then, I’ve spent 21 years writing about personal finance and investing. Therefore, my search for a second income is about making my money work harder.
Nowadays, I’m concentrating on two core ways to generate extra earnings. One is aimed at delivering more cash today, while the other works to build me a better future.
Today, my biggest non-work income comes from collecting share dividends. These are regular cash sums paid by companies to their shareholders. However, not all businesses pay dividends — in fact, most London-listed stocks don’t pay any.
Also, future dividends are not guaranteed, so they can be cut or cancelled at any time. Because of these uncertainties, I prefer collecting cash from the UK’s largest listed companies: those in the FTSE 100 and FTSE 250 groupings.
It’s estimated that FTSE 100 companies alone will deliver £83.7bn of dividends to shareholders in 2024. Therefore, my wife and I grab our slice of this cash pile by owning high-yielding FTSE 100 shares, as well as investing in low-cost UK tracker funds.
Furthermore, to boost our long-term returns, we reinvest this extra income by buying more shares. Later, when we need extra help with future expenses, we will start spending these dividends.
Powering up my pensions
My second income that I’m looking forward to collecting comes from my collection of state, company, and private pensions. Frankly, this pile of pension pots is a mess, so it’s high time that I tidied it up.
Hence, one of my financial New Year’s resolutions is to consolidate and simplify my pensions. If this proves tricky, then I can seek help from the government’s handy Pension Tracing Service. However, I’m fairly sure I know what I have and where.
Another goal is to reduce the ongoing charges and fees I pay to pension companies for managing my money. I aim to put all my personal pensions into a single, simple, low-charging account.
Summing up, by concentrating on share dividends and pensions for the next few years, I hope to deliver a big boost to my retirement income. If my wife and I generate a joint income of £2,000 a week (£100k a year) when we quit work, then we’ll have done the job well!
