But there are downsides to boosting your income with a second job or by turning a hobby into a money spinner.
The impact of tax
Any additional income you earn is likely to be taxable, and this has the potential to push you into a higher tax bracket. It may mean a lot less of what you earn actually ends up in your hip pocket.
If you take on a second job as a PAYG employee, claiming the tax free threshold could see you end up with a substantial tax bill – money that you need to be able to pay to the tax office.
Be careful when it comes to making money from hobbies. If you make repeated sales with a view to make a profit, the tax office may regard what you are doing as running a business. That can mean paying tax on your profits. Speak with your accountant to see how you could be impacted.
How will your day job be affected?
Earning a second source of income will call for an input of your time and energy. This could leave you thinly stretched, and if it impacts your ability to perform well in your main job, your career could be jeopardised.
Check your employment contract too. It could prohibit you from working in the same field; you need to be sure your second income doesn’t involve a conflict of interest.
Additional income may not be insured
If you have income protection insurance in place (and it’s a type of cover all Australian workers should have), it’s unlikely that the additional income you’re earning will be included in the policy. This is critical if you gear your spending to include your extra income or take on new financial commitments based on earning a higher income.
It’s worth speaking with your insurer to see if your policy should be revised to reflect your total earnings.
Will your lifestyle suffer?
There’s little to be gained from earning more money if you’re run ragged in the process.
Speak with your family, be sure everyone is behind you in your bid to earn a higher income, and keep a close eye on whether your relationships are suffering as a result of time spent making extra money.
For expert advice on whether the benefits of earning additional income will really stack up for you and your family, make an appointment to speak to your local Mortgage Choice expert.