Diversify your income and future proof your finances

The rising cost of living has left many Australians concerned about how to make ends meet and future-proof their finances without having to dig into their savings. 

But believe it or not, there are lots of ways to diversify your income and future-proof your finances at the same time. From passive income ideas to those requiring a bit more elbow grease, it’s never been easier to boost your earnings on the side.

Let’s look at the benefits and what you need to know – including tax considerations. It’s also important to have a contingency plan in place, such as having an emergency fund and considering other ways to protect your income.

Benefits of diversifying your income

Gone are the days when you were forced to rely on a single pay packet. Nearly a million Australians now work a second job – and it’s a trend that’s on the rise, according to the ABS.

And, while a side hustle leveraging your skills can result in a significant top-up to your monthly income, there are other ways to supplement your salary, too.

Maybe you’ve got an asset – like a room to rent out, a car space you’re not using, or a guest house or holiday home that you can rent out to short-stay paying guests or holidaymakers. Or perhaps you have the means to invest in real estate, art, shares, or peer-to-peer lending.

However you decide to diversify your income, the benefits can impact your finances positively: added security, more cashflow freedom, and a boost to your earning potential overall.

Investment opportunities to boost your income

Investments can be a savvy way to build wealth, but they also require playing a long game, as the value compounds over time. Some passive income ideas include:

Investing in real estate

For many, brick and mortar is still the safest and least volatile investment, offering tax deductions and hopefully, a steady stream of rental income. A property that rises in value may also mean you benefit from a capital gain when you sell. Real estate investments could also act as a hedge against inflation, as property values and rental income tend to rise over time. However, it's essential to consider the costs involved, including but not limited to, maintenance, property management fees, and potential vacancies.

Investing in shares

Shares are a popular choice for building wealth long-term. By purchasing shares, you become a part-owner of a company and can benefit from its growth and profitability. However, investing in shares requires careful research and comparison of companies. It's crucial to understand the market, analyse financial statements, and stay informed about industry trends. Consider diversifying your share portfolio across different sectors to help mitigate risks. Working with a broker or financial advisor can provide valuable insights and guidance in navigating the stock market.

Creating an art collection

If you enjoy the aesthetic value art offers, and want to curate your own collection, this can also act to generate passive income. Art can hold its value over time, making it a reliable long-term investment and a great way to diversify your portfolio. However, investing in art requires a keen eye and thorough research. It's important to build an understanding of the art market, identify promising artists, and consider factors such as origin and condition. Keep in mind that art investments come with extra costs, including dealers' fees, insurance, and appropriate handling and storage. Engaging a professional art advisor can help you develop a strategic approach and make informed decisions.

Creative ways to monetise your assets

Here are some creative ideas to help you potentially monetise existing assets to boost your finances:

Rent out your car space

If you live in a conveniently located flat with a car space that you don’t use, why not rent it out? Depending on your location, you could earn anywhere from $200+ per month without even lifting a finger. This is a hassle-free way to make use of an otherwise neglected asset.

Rent out a room

If you have an extra room in your home, consider renting it out. This can provide a nice chunk of change each month, especially if you don’t mind having a lodger in your space. Alternatively, becoming a homestay host for an international student can be a rewarding experience that also tops up your bank account.

Become an accommodation host

If you own another property that is vacant most of the time, becoming an accommodation host might be worth considering. Platforms like Airbnb can make it easy to list your property and attract guests. Additionally, you could rent out your current home and stay with friends, family, or a partner when you get a booking, allowing you to make some extra cash. Or if you live on a larger property, you might consider listing your place on something like Hipcamp, so camp or RV enthusiasts can stay and enjoy your property also!

Other income-generating strategies

Peer to peer (P2P) lending

Also known as marketplace lending, P2P refers to managed funds operated via an online platform. For an investor, you choose to invest in a P2P platform and a borrower can take out a loan – effectively borrowing money from an investor rather than going to a bank. If an attractive interest rate is offered that can give you a higher rate of return.

Gig economy

From house-cleaning to gardening, dog-walking to furniture assembly – 6.7% of the population have used the ‘sharing economy’ to make extra cash, according to AirTasker. Dipping a toe in the gig economy can make you some decent money and often you don’t really need to have any specialty skills (for example, an Uber simply requires a car and a license).

Online courses 

If you’ve got a specific skill, why not teach it to other people? There are lots of user-friendly course platforms out there such as Thinkific or Podia and if you can determine there’s a market for the skill you’re able to teach, you could set up a course with modules, videos, downloadable worksheets and launch it for a bit of extra income.

Tips for managing multiple income streams

Chances are, if you’re getting income from several different sources, you might be wondering how the Australian Taxation Office (ATO) could tax your earnings.

You don’t have to pay tax on the first $18,500 you earn – known as the tax-free threshold. You can only claim the tax-free threshold from one employer at a time, so it may seem like you’re getting taxed more on additional income, but that’s not the case. When you do your tax return, all your income is added together, and tax is calculated on your total earnings.

That’s why it’s important to declare any extra income you’re making – whether it’s a full-blown side hustle or something more ad hoc. Either way, it’s always best practice to discuss your plans with a professional financial planner before making a commitment to a side-hustle or investment. 

Protect what you’re growing

Diversifying your income, through various investments, monetisation of assets or starting up a side-hustle, can help you build wealth and secure your financial future. Each option comes with its own set of opportunities and challenges. By spreading your risk and staying informed, you can create a robust financial portfolio that stands the test of time.

Keep in mind that protecting your income is just as important as growing it. Consider whether Guardian Income Protection Insurance may be something that aligns with your financial goals. Request a quote online today and weigh up all your options.