5 ways to pump up your income
Your bank, your boss, and your portfolio aren't doing much to boost your bottom line -- reason enough to try these additional revenue-raisers.
(MoneyMagazine) -- Wish you had a little more money in your wallet these days? Who doesn't?
While the Great Recession is over by most accounts, the Great Income Squeeze lingers on. You're more likely to have had a pay freeze than a pay raise over the past year; and the average bump up for 2010 is expected to be pretty paltry. Meanwhile, your portfolio may still be off its pre-crisis highs, even after the market's rally, and the bank won't pay you spit to hold your cash.
But you don't have to accept the status quo when it comes to bringing in the dough. Whether you're still on the job or retired from the grind, the action plans that follow can help boost your income.
The strategies require human or financial capital (and sometimes both). But those that involve work don't demand extra training, and should leave you leisure time to spare. Bonus: These moneymakers may satisfy your entrepreneurial spirit, get your creative juices flowing, even diversify your career along the way. Talk about a payoff.
The idea: Deploy current (or recent, if you're retired) job skills into other work. A graphic designer might create brochures; a marketing manager might develop a company's social-media strategy. Hemmed in by layoffs and hiring freezes, more employers are using contract workers. Bully for you.
Income potential: With the right few projects, you could easily add five figures to your annual take. Matt Hutter, an IT engineer in Cleveland, started offering computer consulting services on the side in 2006. Now, "I can count on $2,000 extra a month," he says. After income taxes -- and the 15.3% self-employment tax -- Hutter pockets about half of that.
Hassle factor: Medium to high. At first you'll have to hustle just to get the gigs. Also, you'll probably need to complete them outside normal business hours. Be sure you and your family are willing to make that tradeoff of your time.
How to get started: First, get your boss's okay. "You don't want to jeopardize your job just to make extra money," says Tori Johnson, a New York City employment counselor. Then begin putting the word out that you're interested in projects (the best-paying ones usually aren't advertised, says Pamela Slim, author of "Escape from Cubicle Nation"). Start with former employers and colleagues; networking site Linkedin.com can help you find them. If you know others who moonlight, offer to take their overflow work; or see if they'll connect you with their contacts. You can also use sites like Elance.com and Guru.com to search for gigs and benchmark rates.
LOW-RISK OPTION
The idea: Invest in a global dividend fund, since European stocks tend to pay richer dividends. The average yield now for the MSCI EAFE index of overseas stocks is 3.03% compared to 2.12% for the S&P 500. One peculiarity worth noting: Rather than pay out quarterly, some foreign stocks only do so once or twice annually.
How to do it: Stash some of your extra cash in the SPDR S&P International Dividend ETF (DWX).
Income potential: Put $25,000 in the ETF above, at its current yield of 3.56%, and you'd earn $890 in dividend income a year compared to $525 in an S&P 500 index fund.
MEDIUM-RISK OPTION
The idea: Buy a REIT fund. Real estate investment trusts, which invest in income-producing property like offices and malls, aren't taxed if they pass 90% of taxable income on to investors. So yields are typically higher than those of dividend funds. The catch: With rents and occupancy rates reduced by the recession, it's more challenging for REITs to maintain those dividends.
How to do it: Given ongoing concerns about commercial real estate, REITs should make up no more than 5% of your portfolio, says Morningstar analyst Andy Gogerty. He suggests the T. Rowe Price Real Estate (TRREX) fund, which he says has strong management and avoids riskier bets.
Income potential: A $25,000 investment in the T. Rowe Price fund, now yielding 4.76%, would earn $1,190 in a year. (Be aware that most REIT payouts are taxed at ordinary income tax rates, not the more favorable 15% for qualified dividends.)
HIGH-RISK OPTION
The idea: Lend cash that's sitting at the bank on a peer-to-peer lending site like Prosper.com or LendingClub.com, where yields can top 13%. Of course, that means taking a bet on borrowers who may have been nixed by traditional lenders.
How to do it: To reduce default risks, seek borrowers with 800-plus credit scores (yes, they exist on the sites) and spread your money around. Jack Reidy, 42, of Chicago invested $10,000 over 100 loans (60% of them with borrowers who had scores over 700) at Prosper in 2008. Nine of the loans are in default, but he's still averaging an 8% return. "I'm pretty happy," he says. Or a simpler way: Prosper.com's Balanced Portfolio Plan, which averages 7% and puts you in a package of the highest-rated loans.
Income potential: With Prosper's balanced plan, lending $10,000 over three years could earn you $1,115 in interest -- vs. $500 in a high-yield savings account.
The idea: Leverage your expertise into a part-time college teaching gig. You can lead courses for undergraduates at two- and four-year schools, or classes for adults via continuing-education and extension programs. Afraid of public speaking? You can even teach online.
Income potential: Higher-ed courses tend to pay from $1,000 to $6,000, according to AdjunctNation.com, with private four-year schools at the highest end of that range. (Note: At least a master's degree may be required.) Extension pay varies widely. Julie Moss, who manages TV scheduling at HBO, earns $600 for leading a six-week class in her field at NYU's School of Continuing and Professional Studies. With prep time, that comes out to just $18 an hour. But teaching offers rewards beyond money, as Moss notes: "I get to have an impact on students."
Hassle factor: High. "It can easily take 10 hours a week outside of class to prepare for a three-hour course," says Karim Cherif, associate dean at UCLA's Extension program. Online courses can be even more work, since web classrooms are open 24/7, adds Bill Pepicello, president of Internet-based University of Phoenix.
How to get started: Look for gigs at sites like AdjunctProfessorOnline.com and HigherEdJobs.com; and also visit the websites of local schools. Not all jobs are posted, so send a résumé and cover letter to the relevant department head as well as the school's director of human resources.
The idea: Turn unused space in that empty nest of yours into rental income. The most lease-worthy areas are those with private entrances and bathrooms, such as carriage houses and mother-in-law apartments, says Dani Babb, author of The Accidental Landlord. Don't have that? Depending upon the demand, it may be worth creating such a space. Babb estimates it costing around $1,500 to add walls and as much as 10 times that to add a bath.
Income potential: The average studio apartment in the U.S. rents for $947, according to rental data aggregator Padzing.com. Spaces without full apartment amenities can go for up to 30% less, says Babb. Since rents vary widely by city, even by neighborhood, visit your local newspaper site, Craigslist.com, and Rent.com for prices on comparable spaces in your area.
Marc Aarons, 38, who is single and self-employed, rents out three of the four bedrooms in his Laguna Hills, Calif., home. "The mortgage was steep, and my income fluctuates," he says. After expenses and taxes -- levied at one's ordinary rate -- he nets $675 a month, which helps a lot with his mortgage.
Hassle factor: With a good tenant and a space that affords privacy, it should be fairly low. You'll have to keep the property maintained, but you're likely already doing most of what's necessary. The one big downside: "You're always on call," says Babb.
How to get started: Contact your homeowners association and county assessor or inspector to see if you're allowed to have renters. If so, set a price based on going rates. Then post an ad -- including a description of your ideal tenant -- on the aforementioned sites.
Also call the housing offices of any local colleges. In vetting candidates, get proof of income; run background and credit checks too (find info at landlord.com). Have the tenant sign a lease (download one for $15 at nolo.com). And be sure to get a security deposit plus a month's rent upfront.
The idea: Generate profit from your leisure-time activity. Love sports? Referee high school games. Make jewelry? Sell it at craft shows.
Income potential: Hobbyists can earn $2,000 to $5,000 a year if diligent about selling and marketing, estimates Gene Fairbrother of the National Association for the Self-Employed. Services (like party planning or music lessons) have greater profit potential than products because there's less overhead, he adds.
Hassle factor: Medium. You may have to put in more time than you realize. And that may suck some of the passion out of your passion. "Be realistic about whether this is a hobby or something you're serious about making money at," says Rita Gunther McGrath, professor at Columbia Business School.
How to get started: Determine if there's a market for your product or service. That means checking out the competition. For example, a jewelry artist should go to craft fairs, online craft emporium Etsy.com, and trade shows. (Check for area shows at TSNN.com.) This research should also give you a sense of prices. When she began considering reselling the rare dolls she'd collected over the years, Kathi McWhorter, 50, of Los Angeles started trolling eBay. "I looked up sales for Barbies like mine to see who received the best prices and why," she says.
Next, get a sense of expenses by interviewing people who operate similar businesses, suggests Kimberly Seals Allers, author of The Mocha Manual: Turn Your Passion Into Profit. Then, figure out if you could make a profit. This is the go/no-go point. If you decide to proceed, make a list of the attributes of your target customer, and use that to determine your marketing strategy. Once you've done all that, you're in business. 
