Having a job that brings in steady income is a must for survival, but even if you have an established career, it's a good idea to begin doing what you can to earn extra money as soon as you possibly can. There are a number of reasons for this. We'll discuss the more important ones here.
Take advantage of the time value of money. The time value of money, also known as compounding your earnings, is the single largest factor in your future financial position. Hands-down, the time value of money is the most important reason that you should be making extra money as soon as you can. This concept is so big that it is the first item we will discuss. You cannot afford to wait until tomorrow because each day that passes is a lost opportunity when you are dealing with this concept.
So, what is the idea behind compounding earnings? Simply put, 10 years from now, $1 utilized today will be worth than $1 utilized 9 years from now will be. This is because the first year you use your money to earn more money, you will make earnings on your principal (the original $1). Every year after that, you earn money on the profits and the principal. So, the second year, you make profits on your principal and your profits from the first year; the third year, you earn on your principal, your profits from the second year, and the profits on your profit from the first year.
This idea means that the longer you leave $1 earning, the more it will be worth. So, if you're making long-term earning plans, the sooner you get started the better off you will be. The idea of the time value of money is so crucial that many financial planners tell people it is better to earn $100 today than to earn $1,000 in ten years. Get started today, and help ensure a more secure future for yourself and for your family.
Diversify your income stream. You have surely heard the saying, "Don't put all your eggs in one basket." It stands for the proposition that it's best to have a backup plan (and a backup to your backup) just in case something unexpected happens.
Nowhere is this saying more true than when it comes to your income stream. Having a steady job is great, but how would you manage if you lost your job for some reason? The more ways you have extra income coming in, the better off you will be if the unthinkable does happen to you.
Get out of debt. Financial gurus everywhere preach the merit of living a debt free life. While this is great in theory, the fact of the matter is that many people are already living paycheck to paycheck, without a lot of extra available for paying down debt.
If you start earning extra money, you can put it all towards paying down your debt while you continue to live on the money from your main job. Once your debt is paid off, you can take that extra money you are earning on the side and turn it towards strategies such as online consignments or peer-to-peer lending, which brings us to our next reason to earn extra money sooner rather than later.
Build a nest egg of money for the future. When you have some extra money coming in you can use it to create even more wealth. For example, you could lend it to another entrepreneur, or use it to purchase an income generating property such as a rental unit.
Another idea for building your nest egg--and one which has recently gained popularity--is using your money to support a product brand purchase or manufacture inventory to meet demand. Once the business sells the inventory, you are repaid with profit. This is a great way to quickly grow your nest egg without requiring you to know much about the industry in which the business you are partnering with.
Conclusion. There's never a better time to start earning extra money than today. By starting today, you can diversify your income sources, pay down debt you might not otherwise be able to pay off, begin building a nest egg, and take advantage of the principle of compounding earnings.