Having a side hustle is a great way to build your wealth. More Brits than ever before are starting small businesses and becoming their own bosses. Some of us start a side hustle alongside our main job and others quit their jobs and start completely from scratch. But is there a way to build £1 million in wealth from your side hustle?
Here, I take a look at how to use your side hustle to build wealth and ultimately become a millionaire by investing some of your side hustle earnings.
Invest your side hustle income
Many of us start a side hustle to help with day-to-day costs. But once your business gets going, you may have some spare cash to invest. That’s where the amazing power of investing and compounding kicks in.
If you invest some of your side hustle income, then you could start to build some serious wealth. £200 per month, invested from the age of 20 until age 67 could increase to £324,877 by the time you retire. That’s based on your investment averaging growth of 4% over inflation during that period.
Can you afford to invest a little more? If you can invest £500 per month, then you will benefit even more. £500 per month, invested from the age of 20 until age 67 could increase to £812,192 by the time you retire. Pretty amazing considering you’d only have contributed a total of £282,000.
If you want to start investing, then take a look at our list of top-rated stocks and shares ISAs. Or, if you want to invest in individual shares, then you could consider opening a share dealing account.
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Start a pension with your income
If you want to build long-term wealth with your side hustle income, then little extras make a big difference over time. That’s why saving into a pension can be so powerful. Your savings will immediately get a 20% boost in the form of tax relief, with every £80 invested turning into £100 in your pension scheme.
That means a £500 monthly investment can turn into £625 per month, with an immediate £125 tax relief boost. Over a lifetime of investing, it makes a big difference. £500 per month invested from the age of 20 until age 67 (and topped up with 20% tax relief) could increase to a staggering £1,015,240 pension pot by the time you retire.
Other options to become a side hustle millionaire
If you don’t fancy paying into a pension or stocks and shares ISA, then here are some other options to build your wealth and become a side hustle millionaire:
- Build your business: some of the most successful businesses have started as side hustles. For example, Amazon started as a small business in Jeff Bezos’s garage. If you’re good at what you do and you are able to gradually expand, you may be able to become wealthy over time.
- Become a property investor: some people prefer investing in property rather than shares. You will usually need to save a sizeable deposit if you want to arrange a buy to let mortgage. Once you own one house, the rent should gradually start to pay off the mortgage. At some point, you could re-mortgage the first house to release a deposit and buy another rental property. Property investing can be hard work, but it can help you build some serious wealth over time.
If you’re saving for a property deposit, then take a look at our list of top-rated cash ISAs.
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About the author
Alice is a Suffolk-based personal finance writer specialising in pensions, tax, investment and small businesses. She is a qualified Chartered Accountant and has previously worked for KPMG London and Tesco Plc.
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