I know what you are thinking, “Isn’t an extra $50 per week kind of insignificant?” In the short run… ok, yeah, it is probably not the most exciting idea to make a measly $50 more per week. But in the long run, if you invest that extra $50, thanks to the beauty of time and compound interest, it really becomes something beautiful. So here are five financial reasons why you should get out there and start trying to earn an extra $50 per week.
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1) A wealthier retirement
Ok, I am already going to bend the rule here. It is difficult to work every single week making an extra $50 if you have a full-time job, kids, perhaps a passion for brewing terrible IPA’s , etc… You will eventually burnout over long periods of time. So maybe instead of having you work every single week and earn an additional $2,600 over 52 weeks in a year, you may want to work for just 48 weeks out of the year and earn $2,400, which is not bad at all. Another option for you is to do a 60/40 strategy. Which is to earn $60 additional income per week for 40 weeks and earn the same additional $2,400 annual income you would working 48 weeks at $50 a week.
Thanks to the beauty of compound interest. If a 30 year-old saves that $2,400[i] and invests it in an IRA making an annual rate of return of 6.5%, that 30 year-old would accumulate over $295,000 in per-tax savings by age 65 in retirement .[ii]
An extra $295,000 in retirement is powerful. If you made no interest from age 65 to 85, that will allow almost $15,000 annually (before tax). Maybe you want to spend a cool $15,000 per year travelling in retirement? Perhaps see the world? With that amount of money, you can go on some amazing trips in retirement.
We’re talking, Rome, Hong Kong, Rio. You name it, you can go in retirement; you will be free as a bird.
Or, if you are more home body and less of a “see the world” type, that money can be budgeted for health costs, or even care in a nursing facility.
Either way, nearly $300,000 extra for retirement? Yes please!
2) Early retirement, anyone?
If earning and saving an additional $50 per week for the purpose of having extra money in retirement does not excite you, maybe retiring early will. Yes, by earning that extra income, you may retire at the age of 60. That is a five-year-early retirement!
That monthly $50 savings in an IRA would grow to over $200,000 by age 60. This may be the amount of money your 60 year-old future self needs to retire. Guess what, no need to keep working past 60 years old because the younger you was such a smart, hard worker who loved reading articles on Stock Street, you get to retire five years early.
Goodbye commute to work and hello commute to the golf course. How many more rounds of golf do you think you could play by retiring five years early? I’m going to go with at least 500. Unless you are one of those people who are against moving to Florida during the winter, then maybe you will only get in an extra 100. But who’s counting; you get to play more golf!
3) Get those kids educated
If you are able to create an extra $50 per week and allocate that into a 529 college savings plan for your child , you could fund your kid’s college education![iii] Assuming you have a 2 year-old and you saved $50 weekly for 16 years until your child turns 18 and you are paying an effective tax rate of 17.5%[iv], that is going to be worth over $52,000 for your children’s education.
There are a whole lot of universities in the U.S. where $52,000 would be enough money to send your kids. That would be the equivalent of having a tuition of $13,000 per year. Ok, so you can’t afford to pay for Harvard with that amount of money, but in schools like UNC Chapel Hill (in-state), you can.
And if junior gets all snooty about having to attend a $13,000 school, you tell junior, “Stop acting like an entitled millennial crybaby, that’s my generation!”
4) Become a real estate mogul
If you want to eventually purchase a rental property to generate passive income and you don’t have that down payment available in cash, you can use that $50 towards the down payment to purchase a piece of property. If you find an affordable piece of real estate (not the one pictured above) for $100,000 and a loan where you can use a down payment of 10%, you could save that $10,000 for a down payment in less than 4 years!
You could then continue to make your $50 per week, and now have extra rental income coming in to increase your extra savings even more. If you could bring in a monthly profit of another $50 weekly ($200 per month) on that piece of rental property, you could save that money as well. Now you have an extra $100 weekly being invested. That $100 weekly over 30 years will grow to over $400,000.[v] So now you can have even more money in retirement.
Or, maybe you just retire earlier? That $100 weekly will grow to $250,000 in less than 24 years. If you are 30 years old, you can save an extra $250,000 by age 53. Maybe that is the amount that gets you to retirement. If you were planning to retire at age 65, looks like you just shaved off eleven years of work!
Just, please, I’m begging you, after you become a real estate mogul, don’t run for president .
5) Peace out, debt
If you have debt via student loans, credit card bills, etc. you can use that weekly $50 to increase your monthly payment.
If you have credit card debt of $20,000 with an interest rate of 20%, that card could take 65 months to pay off at $510 per month. Making an extra $50 per week and adding it towards that card can shave off over 2 years of credit card payments. This can save you over $5,300 in interest!
Maybe you have student loans with an interest rate around 7%. The average student loan balance out there is around $30,000. Paying off a $30,000 student loan at 7% over a 10-year period would require a monthly payment of almost $350 per month. Paying an extra $50 weekly towards that student loan could reduce the payoff period from ten years to just over five and a half years! Pay off your student loans in almost half the time? Sounds good to me .
Related: Take a look at Stock Street’s Student Loan Debt Page! Stock Street – Student Loan Debt Page
So, what do you say? Are these not attainable goals anyone can achieve?
I say a mere $50 per week of extra income is something you can accomplish!
The next question you probably have for yourself is, “How am I going to make an extra $50 per week?” Keep coming by Stock Street the next few months because we will be doing reviews of side gigs available to you.
We are excited to report that we have multiple companies we are looking into. So keep visiting, or even better, sign up for our email list.
Want to read our earning extra income ideas? Here are links to all of all of them!
Readers: do you think you can make an extra $50 per week? What would you do with the money? Would you save it? Pay down debt? Etc.
[i] The future value can be considered to be in today’s dollars. I am making the assumption wages will grow with inflation over time. The $50 will obviously have to increase over time with inflation. As long as the amount earned keeps up with inflation, we will consider the future value to be in today’s dollars.
[ii] All calculations in this article use a 6.5% growth rate and are calculated using end of year growth in order to be conservative.
[iii] The positives of the 529 plan is that you can both pay for tuition and room and board with the money in a 529, so you don’t have to pay taxes on the growth of the money as long as you spend it on “qualified education expenses”, like tuition and room and board. But be careful because your child doesn’t need the money in the 529 plan, they are terrible to distribute for non-educational expenses.
[iv] Everyone’s taxes are different, and tax rates will change over time. I used a 17.5% tax rate because some readers will make less than 50k marred filing jointly, so this is conservative for them. Some will be in higher brackets, but some will do side gigs which can have write-offs to reduce the side gig’s taxable income.
[v] Assuming you start with $0 since you invested it all towards the down payment, and using that same 6.5% rate of return and end of year growth. This is a conservative estimate because the value of the real estate is not included either, which would hopefully appreciate over that time as well.
Photo Credit: Flickr – Debt – Christian Schnettelker
Photo Credit: Flickr – 2016 PVCC Graduation