Millennial Money: Maximizing Resources in a Mogul’s Market By Brooke Johnston In today’s challenging financial environment, it’s essential to diversify your income streams and maximize your potential income. As nice as a salary is, your career doesn’t have to (and arguably shouldn’t) be your only source of financial success. To newly independent individuals, investing, saving, taxes, and finances can be extremely daunting. But — they don’t have to be! We’ve got some tips for getting started on taking control of your financial future. Passive and Side Income Sources You’ve got your day job. But, if you really want to get ahead, you’ll need to build one or more avenues of secondary income. This can look like passive income (e.g., investments) or active side-hustles (e.g., online sales). We’ve broken down a few options for generating a secondary income source below. eBay Sales If you’ve got some extra stuff lying around, you can meet two goals at once by opening an eBay store. Gather up the clutter in your living space and give it a good clean and any needed TLC. Once it’s as new looking as it’s going to get, open up your computer, create an eBay store, and get cracking! You’ll make some extra money and clean up your home at the same time. Already living that minimalist lifestyle? Try your hand at upcycling free and low-cost items from the bottoms of driveways and classified listings! You’ll be shocked at how quickly eBay sales can add up. Real Estate Investments To take advantage of real estate investing, you’ll need access to some start-up capital. Purchasing a rental property can be expensive, but it will pay off very quickly with the right tenants. Each monthly rent installment will add equity to your property, increasing its value with little to no effort on your part. But, beware: lease to the wrong tenant, and your investment property will cost you both time and money. Check out local tenant law to make sure you understand your rights and responsibilities and make sure to vet prospective tenants thoroughly. Building Credit Another important financial goal is building credit. Without credit (or with bad credit), you’ll find it very challenging to get approved for things like mortgages, car loans, and even credit cards. The best way to build (or fix) your credit is to get a credit card. Spend money on your credit card every month, and make sure to pay off your card in full every month, too. That way, you’ll get the benefits of using the credit card without paying exorbitant interest rates. You should also be careful to make your payments on time every time. Using credit will slowly but surely build up your credit history, making you a more desirable candidate for obtaining a mortgage, car loan, or other big-ticket items requiring a loan or line of credit. Financial Minimalism A final way to boost your income is to sit down and take a hard look at your expenses. For example, do you really need that fourth pair of neon boots? Don’t get us wrong — we aren’t saying that you should save at the expense of enjoying life. Just make sure that your priorities are how you’d like them, and that you aren’t spending money on frivolous things that don’t actually make you happy. A helpful trick for this is to pick a financial goal (e.g., owning your own home), and then asking yourself with every purchase: do I want this more than I want to buy my own home? If the answer is yes, great! Enjoy those boots. If not, it might be time to revisit your closet for other suitable footwear. Future Investments You’ve got your side hustle locked down and have some extra cash flowing. That’s great! But — what now? That extra money isn’t growing by merely sitting in your chequing account. Use some of your new financial know-how to grow your financial molehill into a mountain! Dividend stocks Looking to get into the stock market? One great way to get your feet wet is with dividend stocks. These are a very particular kind of stock: rather than solely relying on a price increase, dividend stocks regularly pay out dividends to their shareholders. These companies are usually well-established and have large profit margins. Alternatively, stock dividends paid out in additional stock shares (instead of in cash). Depending on your financial goals, these dividend stocks will add to your portfolio and help you build a long-term financial plan. Blue-Chip Stocks Blue-chip stocks refer to the stocks of an established, stable, and well-recognized business. They’re relatively safe bets: the company isn’t likely to go under and has a clear history of growth and success. Investing in these stocks might not net you a massive spike in profit, but they are a stable way to grow your investments safely. If you’ve never invested in the stock market before, blue-chip stocks are a great starting point. Roth IRAs Roth IRAs are individual retirement accounts designed to offer tax-free growth during your income-building years and tax-free withdrawals during your retirement. To benefit from the tax-free withdrawals, accounts must be at least five years old before any money is pulled from them, and you must be at least 59 ½ years old. Roth IRAs work by investing your money for you as you save for retirement. While overall a great idea, it is possible to lose money investing in a Roth IRA. This risk can mostly be mitigated by investing early and regularly in your account. That way, you maximize the amount of time your investment can grow. Taxes You’ve maximized your income and built your financial portfolio into a horde that even dragons would be jealous of. And then the taxman comes. A proper understanding of how different kinds of tax will affect your tax bill can help you avoid a devastating hit to your finances. Capital Gains Tax Capital gains tax is applied to any profit made from the sale of an asset, including cashing in stocks, selling your home, or any other income generated from the sale of significantly valuable assets. Capital gains are divided into short term (the asset was held for less than one year) and long term (the asset was held for more than one year) gains. This classification affects the rate that capital gains are taxed at. Typically, short term gains are taxed as regular income. Income Tax Income tax is — you guessed it — the tax placed on your yearly income. Income is taxed at the federal level, but also often at the state and local levels. Tax rates (at least at the federal level) are graduated, meaning that the more you make, the higher your tax rate is. While most employers take tax off each paycheck, you are ultimately responsible for making sure that you have paid the correct amount each year. This is especially important if you’re maximizing all of the above tips: income from stocks, side hustles, and capital gains all can count as income that needs to be taxed. The Bottom Line A savvy financial plan needs to be diverse in both its income structure and its overall goals. The key to building a financially stable life is in the daily grind: increase income in whatever way you can, invest when you’re able to, and save as much as possible.