03 Feb

Ask Kathryn: How To Make or Save $10,000 (£7k) This Year

Dear Kathryn: My boss just told me that the problems in the economy mean that I can’t work overtime anymore. Overtime pay is where I make a lot of my money. This change means that I’m going to earn about $10,000 less this year than I did last year. I really need that money! What can I do to make up for the $10,000 that I won’t be getting from overtime?

I’m sorry to hear that you’re facing these financial difficulties. Unfortunately, you are not alone. We are all going through some lean times right now. The good news is that there are a lot of changes that you can make to help make up for the radical difference in annual income that you’re probably going to experience this year compared to last year.

There are two ways to approach the problem of earning less at your job this year. The first is to try to figure out how you can earn that money in some other way. The second is to figure out how to cut back on expenses so that you need less than what you used last year. Let’s take a look at how to do both of those things. If you can find a way to earn about $5000 from some sort of new income and also to save about $5000 on annual expenses, you will find that you won’t suffer too many hardships as a result of your change in employment.

How to Earn $5000 More This Year

The first thing that we want to tackle is how to get some more income coming in. If you can earn about $5000 extra this year even though you won’t have overtime pay coming in, you’ll be in good shape. Even if we take away the month of January since it’s done already and take away the month of December since nobody wants to work extra during the holidays, this still only means that you need to earn an extra $500 per month to meet your goal of earning $5000 extra dollars this year.

Here are some ideas for earning that extra $500 per month:

• Take on a second part-time job. You may find that you can easily pick up part time employment that doesn’t interfere with your current job and allows you to have a flexible schedule. When thinking about such a job, consider those jobs that you might have tried to get in college. Tutoring, babysitting, cleaning house, walking dogs and doing other services for people in your area could provide you with that extra income that you need. And since these are things that are probably significantly different from the professional work that you do, they may not even feel so much like work, especially compared to those overtime hours that you were putting in.
• Start a home-based business. Perhaps you don’t want to leave your home during the hours that you aren’t at work because you want to use this new time that you have to be with your family. Consider starting a business from home that the family can participate in. There are many home-based businesses that you can start with very little investment capital. Open up an eBay store, start making candles for sale on the Internet or launch a local party planning business. This change in your job situation may actually be a good thing – you can start doing more of the things that you like to do while still getting paid!
• Learn a skill that lets you telecommute. Put in some time learning how to do freelance writing or blogging. Many people make a decent side income just from the advertising revenue that they get for publishing articles on sites like HubPages and Squidoo. If you put in the effort to learn a skill like this and you commit to doing it at least 5-10 hours per week, you should be able to earn that extra $500 that you need.
• Sell some of the things that you have around the house. Start looking around at what you have; maybe it’s time to sell a few things. If you’re lucky, you have an antique that you can unload that’s worth $5000 and then you’re done for the year. But even if you just start selling your used books online and holding yard sales every few months, you can earn at least a portion of that $5000 that you’re trying to make.
• Rent out a room in your home. There’s a good chance that you can make $500 per month just by taking someone into your home and charging them rent. If you’ve got a spare room – or can make one – this could be a great way to increase your income. Of course, be choosey in who you take in, lay some ground rules for the home and make sure that you consider the added cost of utilities for an extra person.

How to save $5000 on expenses this year

In addition to earning an extra $5000 this year, you’re going to want to cut back on your expenses by about $5000. That sounds like a lot of money that you won’t get to spend but remember that it amounts to only about $500 per month. Sit down and figure out where your money goes and start looking at where you can cut back each month to stop sending that $500.

Here are some common ways that people cut back on their spending to reduce their total annual expenditures by $5000 or more:

• Barter your time instead of spending your money. Take a look at any places where you spend money on services. If you pay a housekeeper, babysitter, accountant, massage therapist, auto mechanic or anyone else like this then you have the opportunity to save yourself some money by using a barter system with these people. Figure out what skills you have that you could trade with these people so that you can receive their services without spending any money. Perhaps you’re great at yard work or computer repairs; trade this with the housekeeper and the babysitter and the accountant and you may find that you easily save more than $5000 per year.
• Deal with your debt. A big chunk of your money could be going to paying the interest on your outstanding debt. Now is a good time to deal with that problem. Refinance or consolidate your debt to reduce the amount of interest that you’re paying. School loans can be deferred or placed on graduated payments to reduce the total amount paid out monthly.
• Move to a cheaper place. Most people are spending a lot of money on their rent or mortgage. An easy way to reduce your annual spending is to reduce what you’re paying for your home. You can move to a less expensive home or relocate to a cheaper city. In some cases, you may find that you could rent a place for cheaper than what your mortgage is then rent out your existing home to increase your income; you can live in the rental until you have enough income to move back into the original home. Another method people use is to move into a place where they can do housekeeping, babysitting, apartment management or landscaping in exchange for reduced rent.
• Reduce what you spend on food. A large chunk of our annual income goes to the grocery budget and to dining out. You may not be able to reduce this by $500 per month but you can probably reduce it by $50 or $100 per month which makes a big difference over the course of a year.
• Don’t buy anything new this year except necessities. It’s easy to spend money on new clothes, new DVDs, new furniture, new toys … but it’s not really necessary. Make a commitment to yourself to spend a year living a truly frugal life and not purchasing anything beyond the basics. It’s a good challenge and there’s a good chance that you’ll easily save that $5000 that you need to save this year.
• Give up your vices. Okay, maybe you’re not ready to commit to giving up the purchase of all new things. But how about giving up some of your vices? If you smoke, drink alcohol or have a shoe fetish then you’re probably spending a lot of money that you could choose not to waste if you’d change your habits. You can also give up some of the luxuries around the home like the cable with DVR and the landline phone.
• Get rid of your car. This is easier for some people than others, of course, depending on where you live. If you can do it, you can save a lot of money on repairs, insurance and gas. Plus you can get some cash from the sale of the car.

I know that it can be really frustrating trying to figure out where an extra $10000 is going to come from this year. However, it is something that can be dealt with if you’re committed to making it work out. The key is really to try as many different things as you can to increase your income while decreasing your spending. Be flexible in your approach – you may be able to earn money this month by selling some old junk whereas next month you’ll need to take on a part-time job. Just keep working on figuring it out and you’ll be okay.