After I wrote a simple primer on Roth conversions a couple weeks ago, several readers reached out asking for more details. A few specific snippets of those questions include:
I see many articles like this about lowering your tax bracket when doing Roth conversions. But, what about the amount of money that can be made by not doing Roth conversions and letting the taxable [sic: qualified, or not taxable] money grow in an account like an IRA or 401K? Is that math too hard to explain?
Sure your RMDs will be higher and you will be taxed more, but how much more money will you make by letting that tax deferred money grow? You could assume a rate of return at 6% for the illustration.
Kelly M., Question 1
A wise man once said “never pay a tax before you have to.” Back around 2015 I had the owner of an income tax service try to convince me to convert all my traditional IRA money to Roth. He said tax rates were going to go up and he was converting all of his own personal traditional IRAs. Fast forward to 2017 and Congress actually ended up lowering tax rates. I wonder what he thought about his conversions after that.
Anonymous, Question 2
Even with my spouse still working, I don’t think we’ll hit the IRMAA limits while I do Roth conversions before I take Medicare. But, could Roth conversions now help me avoid the IRMAA thresholds when I’m taking RMDs in the future? Or, is it worth doing Roth conversions to avoid the IRMAA thresholds? I’d be interested in an article like that.
Anonymous, Question 3
To summarize those three questions:
Does the math of Roth conversions really work?
But since we don’t know future tax rates, how can we confidently convert assets today?
What about IRMAA (the income-related monthly adjustment amount), which is an additional Medicare surcharge on high-earners?
Let’s address these questions one at a time.
Does the Math of Roth Conversions Really Work?
Roth conversions involve many moving pieces, as you’ll see in this simple Roth conversion spreadsheet.
Reminder: you can make a copy of the spreadsheet via File >> Make a Copy
There are terrific financial planning software packages that take care of this math. I wanted to present 95% of the good stuff in a free format that you all can look at. Hence, Google Sheets.
Nuanced Tax Interactions
Especially important is the interaction between normal income (via Traditional account withdrawals), capital gains, and Social Security. These taxes interplay in nuanced ways. A simple example:
Let’s say a Single retiree’s annual income is:
$5000 in interest income
$5000 in long-term capital gains
$30,000 in Social Security benefits.
If you plug that into a 1040 tax return, you’ll find that:
None of that Social Security income is taxable.
All of the interest and capital gains are enveloped by the Standard deduction
Resulting in zero taxable income and a $0.00 Federal tax bill.
But if we copied Scenario A and added in $30,000 in Traditional IRA distributions, what happens? I think we all expect that the $30,000 distribution itself must have a taxable component, but you might not know that:
The IRA distribution affects Social Security taxability. Now, $22,350 of the Social Security income becomes taxable. That’s right. Simply by distributing IRA assets, you’ve now increased how much Social Security you pay taxes on.
The Standard deduction still helps, but there’s now a remainder of $48,500 in Federal taxable income.
Resulting in a $5584 Federal tax bill.
It’s not the end of the world. Taxes happen. They pay for our public shared interests.
But part of tax planning is understanding ahead of time what your future tax bills will look like. It’s important to understand how taxes interact. And this is just a simple example!
Measuring Roth Conversion Benefits
Going back to this spreadsheet, you’ll three tabs full of retirement withdrawal math. The Assumptions tab contains important information on our hypothetical retiree’s starting point (e.g. $2.9M in investable assets), their annual spending ($100K), their future assumed growth (5% per year, after adjusting for inflation), and other important numbers.
Note – this math takes place in “the convenient world” where inflation is removed from the math.
Then three tabs are presented with different Roth conversion scenarios, described below:
“Baseline Calculations“
This tab shows a retiree not focused on any conversions
They want to leave to their children both Roth assets (if possible) and taxable assets (on a stepped-up cost basis).
Therefore, they attempt to fund as much of their retirement using Traditional assets as possible
“No Trad Withdrawals”
This tab shows a “worst case” scenario, to help bookend the analysis. This retiree is not pulling any funds from their Traditional accounts (unless necessary). Thus, we’d expect them to have large RMDs and large RMD-related tax bills.
“Reasonable Conversions”
This tab shows a “reasonable” Roth conversion timeline, electing to convert $1.7 million throughout their retirement, while funding their lifestyle using a mix of Traditional, Roth, and taxable assets along the way.
By no means is this “optimized.” But it’s reasonable, and better than the first two scenarios, as we’ll see below.
Pros, Cons, and Results
The three scenarios end up similar in multiple ways.
Our retiree never has an issue funding their annual lifestyle. This is of utmost importance.
Our retiree reaches age 90 (“death”) with roughly $5M in each scenario.
But there are important differences (as we’d suspect).
The Baseline scenario ends with $5.00M. Of that, 27% is Traditional, 35% is Roth, and 34% is Taxable. They’ve paid an effective Federal tax rate of 20.7% throughout retirement.
The No Traditional Withdrawal scenario ends with $5.20M. Of that, 63% is Tradtional, 0% is Roth, 37% is Taxable. They’ve paid an effective Federal tax rate of 18.8% throughout retirement.
The Reasonable Conversions scenario ends with $5.17M. 18% is Traditional, 68% is Roth, and 14% is Taxable. They’ve paid an effective Federal tax rate of 13.9% throughout retirement.
The Same, But Different
These three scenarios share many similarities. All three result in successful retirements. But there are important differences.
Our Roth converter paid far fewer taxes and, ultimately, left a majority of their tax dollars to their heirs via Roth vehicles, and thus tax-free.
The No Trad Withdrawal retiree paid 28% effective tax rates in their final years (only going further up in the future) and left 63% of their assets in Traditional accounts with a large asterisk on them.***
***TAXES DUE IN THE FUTURE*** …unless you’re leaving the Traditional IRA assets to, for example, a non-profit charity. But if you’re leaving the Traditional IRA to your kids, they’ll owe taxes when they withdraw the funds.
Long story short: Roth conversions work to your benefit when executed intelligently.
Should You Worry About Leaving Behind Traditional Assets?!
I don’t want to freak you out. Your heirs will appreciate you leaving behind a 401(k) or Traditional IRA for them.
But it’s worth understanding that they’ll owe taxes on that money (usually). Let’s dive into an example with simple math: a $1 million Traditional IRA left to one person (e.g. your child).
That person will most likely set up an Inherited Traditional IRAand (via new-ish rules in the SECURE Act) will have to empty that account by the end of the 10th year after your death. The withdrawals can be raised and lowered during those 10 years. Much like with Roth conversions, it makes sense to take larger withdrawals during otherwise low-income years and vice versa.
But if the beneficiary is in the middle of their career, a series of 10 equal withdrawals makes sense. Some rough math suggests ~$135,000 per year is a reasonable withdrawal amount (based on account growth over the 10 years).
That withdrawal is taxed as income for the beneficiary. If they’re already earning $100,000 per year of normal income, then taxes will consume ~$41,000 of their annual $135,000 withdrawal. State taxes might take another bite.
Again – I don’t want anyone to cry over the prospect of inheriting $94,000 annually for 10 years. Where can I sign up?! But it’s also worth understanding that 30% of this inheritance is going to Federal taxes.
“Never Pay a Tax Before You Have To”
What about Question #2 from the beginning of the article? A reader wrote in and suggested one should “never pay a tax before you have to.”
While pithy, it’s false.
If you can reasonably front-load low tax rates to prevent later high tax rates, the math supports you. What we’ve covered so far today is clear evidence of that.
Now, in the reader’s defense: I’d rather delay taxes if thedollar amounts are exactly the same. That’s one argument behind the tax-loss harvesting craze: I’d rather pay $100 in taxes in the future than $100 in taxes today.
But Roth conversions work differently. Done well, Roth conversions allow you to pay a 22% tax on $50,000 today to prevent a 37% tax on $100,000 in the future. It’s apples-and-oranges compared to the tax-loss example.
And perhaps the bigger lesson: there are few universal rules in personal finance. The pithy rule that works in one scenario (“never pay a tax before you have to”) might fail miserably in another scenario. Let the math guide you.
What About IRMAA?
Irma used to only be a name you’d give to the great-grandmother character in your 11th-grade B-minus fiction story.
No longer! Today, IRMAA has been given new life (which, I bet, was covered by Medicare!)
IRMAA (Income-Related Monthly Adjustment Amount) is a Medicare premium surcharge imposed on higher-income beneficiaries in addition to their standard Medicare Part B and Part D premiums. The amount of IRMAA is determined based on an individual’s modified adjusted gross income (MAGI) and can result in higher healthcare costs for those with higher incomes.
In plain English: high-earners pay more for Medicare.
Question #3 today asked if Roth conversions can be used to avoid IRMAA premiums. The answer is: yes.
But first, how painful are these IRMAA surcharges in the first place?!
Important note: you’ll see below that the 2023 IRMAA brackets are based on 2021 modified adjusted gross income (MAGI). That same 2-year delay holds for future years. Your 2024 Roth conversions (or lack thereof) will be important in determining IRMAA in 2026
If a married couple’s MAGI in 2021 was $225,000, they’d end up paying $231 per month (or, more accurately, $462 per month for the couple) as opposed to $330 for the couple if they earned less than $194,000. That’s a difference of $132 per month or $1584 for the year.
I’m of two minds here. Because:
Yes, I believe in frugality. A penny saved is a penny earned. Why pay $1584 extra if you don’t have to?
But if you’re earning $200,000in retirement, do you also need to stress over a $1500 annual line item?
Personally, I’ll be stoked if my retirement MAGI is $200,000. It’ll be a sign that my financial life turned out unbelievably well. I won’t mind the IRMAA.
The people most likely to suffer IRMAA are also best positioned to deal with it.
Will IRMAA Get You?
The 2-year delay in IRMAA math means you might get IRMAA’d early on in retirement.
Imagine retiring at the end of 2023. The peak of your career! You and your spouse earned a combined $300,000 and now you’re settling down to mind your knitting. Like all U.S. citizens, you sign up for Medicare just before you turn 65.
Come 2025, Uncle Sam and Aunt IRMAA are going to look back at your 2023 income and surcharge you.
But the good news, most likely, is that your 2024 income is quite low in comparison and IRMAA will drop off in 2026.
Can Roth Conversions Help?
Remember: RMDs are forced and count as income, and that has the potential of “forcing” IRMAA on retirees as they age.
So to answer our terrific reader question: yes, Roth conversions can help here. You can use Roth conversions to shift the realization of income from high years to low years, preventing or mitigating IRMAA in the process.
But once more, make sure the juice is worth the squeeze.
If a 75-year-old has a $200,000 RMD that kills them on IRMAA, ask yourself: where does a $200,000 RMD come from? Answer: it’s coming from an IRA of over $5 million. Should someone with $5 million be losing sleep over IRMAA? I don’t think so.
That’s A Lot of Numbers…
A long and math-heavy article. I hope this helped you out! We covered:
Roth conversions can be objectively helpful, decreasing taxes in retirement and shifting large portions of portfolios from Traditional accounts (with potential taxes for heirs) into Roth accounts (no taxes for heirs)
Taxes in retirement are nuanced and interconnected. In today’s example, realizing extra income (via IRA distributions) also triggered extra Social Security taxes.
It’s not bad to leave behind Traditional assets to heirs. They’re getting a wonderful gift from you. But there will be taxes, which should be planned for.
There are many scenarios where it makes sense to pay taxes before you “have” to.
IRMAA is a negative reality for many retirees, but the people most likely to suffer IRMAA are also best positioned to deal with it.
Roth conversions can be used to mitigate IRMAA over the long run.
As always, thanks for reading!
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-Jesse
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Looking for the best business ideas for kids? Finding business ideas for kids is a great way for them to learn about starting their own business, being responsible, and understanding money from a young age. They get to understand how to set goals, handle money, and feel the joy of earning their own extra income….
Looking for the best business ideas for kids?
Finding business ideas for kids is a great way for them to learn about starting their own business, being responsible, and understanding money from a young age. They get to understand how to set goals, handle money, and feel the joy of earning their own extra income.
Whether it’s in the summer, after school, or on weekends, having a small business can be a fun and educational thing to start.
I did many different things as a kid to make extra money, and they all taught me so much. There are many different ways for kids to make money, as you will learn below.
Best Small Business Ideas for Kids
Here are the best business ideas for kids to start.
1. Sell arts and crafts
If your kid enjoys being creative and making things with their hands, selling arts and crafts can be a great business idea for them. It’s not only fun but can also help them earn some money.
Here are some crafts kids can make and sell:
Bead jewelry – They can make necklaces and bracelets with colorful beads.
Homemade candles – Candles are simple to make and can be sold to people who like to add a cozy feel to their homes.
Paintings – If they like to paint or draw, they can create artwork to sell.
Slime – Slime is really popular and fun to play with. Kids can make and sell their own slime in different colors and maybe even add things like glitter to make it unique.
Pet toys – If they love animals, they could make toys for pets. Choose materials that are safe for animals and design toys that pets would enjoy.
Soap – Homemade soap is always nice to have, and people love to buy it. This can be a fun item to make on their own.
Stickers – Everyone loves stickers and this can be a fun way to make extra money on Etsy or in person.
Recommended reading: 16 Best Things To Sell On Etsy To Make Money
2. Tutoring
If your child is really good at a subject like math or science, they can start a tutoring business. They can help other kids who might find those subjects tough.
Tutoring is something they can do after school when they’re finished with their own homework. It’s a great way to use what they know to help others and even make some money.
Learn more at The Best Online Tutoring Jobs.
3. Babysitter
If your child loves being around kids, babysitting can be a great way to start their journey into the world of small businesses for kids. It’s not just about watching kids; it’s about creating a fun and safe environment while parents are away.
Your child’s reputation is important, and they can start with their neighbors or family friends who already know and trust them.
To decide what they should charge, you can look at what other babysitters charge in your area, but consider how much experience your kid has.
I recommend having your child learn about basic first aid and child care, and you can find classes through community centers or the Red Cross.
Babysitting is what I did the most of as a kid. It was my first full-time job, actually. Starting at the age of 14, I was working around 40 hours per week in the summer taking care of a baby in my neighborhood (I found the babysitting ad on a local bulletin board!). I earned $10 per hour. The mother was a nurse, so I was working about 13 hours per day for a few days each week.
4. Pet sitting and dog walking
If your kid loves animals, starting a pet care service or dog walking business could be perfect for them. It’s more than just a job; it’s a way to care for pets when their owners can’t.
In this job, you might look after pets either at your own home (called pet boarding) or take care of them at their home.
Depending on their age, your child may walk the dog for 15 to 30 minutes a day, or more.
I was recently looking at a local bulletin board, and a parent put up an ad for their 10-year-old to walk dogs. The parent would be there as well (to ensure the safety of both the child and pet, of course), but it was a small business idea that the kid wanted to start. If your child is a little older, they may be able to do this on their own as well.
5. Lemonade stand
Starting a lemonade stand is more than just a fun activity; it can be their first step for starting a business as a kid!
Your child will probably want to start with a simple recipe, as lemonade does not have to be hard. They can try different flavors, like strawberry, to make your stand unique.
They will need pitchers, cups, ice, and a table.
Work out how much each glass of lemonade costs to make, and then decide on a price that makes a little profit but is still affordable for customers.
6. Mow lawns
Mowing lawns is a great way to start a small business as a kid. It’s simple to get going, and kids can make money during spring and summer.
They’ll need a lawn mower, fuel, and basic gardening tools.
Next, it’s time to set rates. Figure out how much to charge for each yard. A good plan is to look at what others charge and then set a competitive price.
Your kid can talk to neighbors, family, and friends to find new lawn mowing jobs.
I know many, many families who have kids who mow lawns to make money. I also know several people who have older kids who have turned this into a full-time business that has grown with them as an adult.
7. Rake leaves
Raking leaves is a great business idea, especially during the fall. Trees drop their leaves and many homeowners need help gathering and disposing of them.
To get started, your kid will need to have a sturdy rake, bags for leaf collection, and a pair of gloves to keep their hands clean and protect them from blisters.
8. Shovel snow
If you live in a place where snow falls, a kid can make money by shoveling snow. This job is great if they enjoy being outdoors and don’t mind the cold. Start by asking family and neighbors if they need help clearing their driveways and walkways.
They will need a few things to start:
A shovel: This is the main tool, of course!
Warm clothes and gloves: Stay warm while they work.
Your kid can hand out flyers or tell friends to spread the word. Social media can be a big help too. A simple post can let everyone in your neighborhood know that your kid is ready to help clear the snow.
9. Birthday party assistant
If your kid likes being around kids and celebrations, becoming a birthday party assistant could be a fun way for them to earn money.
They will help set up decorations (balloons, banners, and table settings), organize games (such as being ready to lead a game of musical chairs or a treasure hunt), and make sure the party runs smoothly (they might help serve cake and snacks to the little guests.).
10. Start a YouTube channel
Starting a YouTube channel can be exciting. If your child is under 13, remember, they can’t have their own account. But with a parent’s help, they can still share videos.
Your child can pick something they love, whether it’s science experiments, video game walkthroughs, or crafting tutorials.
They will want to post videos regularly – maybe post once a week to start.
Remember, it’s all about doing something fun and sharing what they love. Starting a YouTube channel takes work, but if they stick with it, they could make something really cool.
11. Lifeguard
If your child is looking for a responsible way to earn some extra cash, becoming a lifeguard could be a way to make money.
Not only does this gig teach important life-saving skills but it also teaches them responsibility and discipline. Many local pools or community centers offer lifeguard certification courses, giving them an excellent opportunity for young entrepreneurs to get valuable training.
Running a small lifeguard business can be a win-win situation for kids and the community. They can sell their services to local events, pool parties, or even provide private swimming lessons.
Note: In most states, you need to be at least 15-years-old to become a lifeguard.
12. Start a greeting cards business
Starting a greeting card business is something your kid can have fun with and get their creative juices flowing! They can make cards for birthdays, holidays, thank you, congratulations, or just to say hello.
They will need:
Art supplies, like colored pencils and markers
Cardstock or heavy paper
A printer (if they’re printing designs)
Digital design software like Canva (this is optional)
They could start by selling to family and friends or at school events. As they grow, they could try selling them at local markets or even online.
13. Neighborhood helper
As a neighborhood helper, they can sell their services to people around your community. This is a great way to help others and earn some money.
Your child can sell services such as:
Car washing: Wash cars for people in the neighborhood for a shiny finish.
Grocery running: Offer to pick up groceries for those who can’t go themselves.
Gardening: Help maintain gardens by planting flowers or weeding.
Lawn care: Keep neighbors’ lawns neat by mowing them regularly.
Pet walking: Walk neighbors’ dogs when they’re busy or away.
To get started, your kid should make a list of what they’re good at and what they might enjoy doing. Then, let neighbors know about their services with flyers or tell them directly.
If you have many kids, they could even involve multiple family members so that each kid has their own specialty or niche as a neighborhood helper.
14. Reseller
Starting a small business as a reseller means buying products at a lower price and selling them for a profit. They don’t need to make their own things; instead, they can find good deals on items, then sell them to others for more than they paid.
They can get items from yard sales, thrift stores, or their own home.
They can sell online on places like Etsy or eBay, or at school events and local fairs.
Recommended reading: 16 Best Selling Apps For Selling Stuff Online And Locally
15. Voice artist
Becoming a voice artist can be an exciting way for kids to explore and share their talent. If they enjoy speaking and have a unique voice, this could be a fun business idea for them.
They can sell services for character voices for cartoons and animations, narration for audiobooks or educational videos, commercial voice-overs for ads and marketing materials, and more.
They will need to start with a good microphone and recording software on a computer. They can practice by reading out loud and recording their voice.
To find work, they can join online platforms like Fiverr, where people look for young voice talent.
Recommended reading: How To Become A Voice Over Actor
16. Actor
If your child is interested in acting, the first step is to take acting classes, which can help them learn the skills they need to act in plays, movies, or TV. These can be found online or at a business near you.
Once they have some skills, they can try out for local theater productions and school plays, and join their school’s drama club. Being part of a production gives them practical experience and shows them what it’s like to work with a director and other actors.
17. Sell candy
Starting a candy business can be both fun and rewarding. With a love for sweets and a little creativity, your child can turn their passion into profit.
Candy is something that I see children selling all the time, and it completely makes sense – everyone loves candy! So, it is an easy item to sell.
They can sell homemade treats like chocolate-covered pretzels or gummy bears. Or, if you prefer, you can buy popular brands in bulk and sell them individually.
Next, consider where they will sell the candy. They may be able to sell at school, neighborhood, or local community events, and you should always ask for permission when selling in public areas or on someone else’s property.
Pricing the candy is important. You’ll want to make sure your kid covers the cost of what was spent and adds a little extra for their profit. Selling candy for $2 or $3 can make it easy for customers to buy without thinking twice.
18. Start a blog
If your kid is interested in working online, then they may want to try starting a blog. It doesn’t take a lot of money to get started, and it can teach a kid a lot about how to run a website.
I have met many teens over the years who have started a blog, and I think it’s a great small business idea!
Whether they want to share their hobbies, interests, or personal experiences, a blog gives them a platform to be creative and communicate.
Other business ideas for kids related to this include starting accounts on social media platforms like Instagram and Twitter, and starting a podcast.
Recommended reading: How To Start A Blog Free Course
19. Deliver newspapers
Newspaper delivery is a classic way for children to earn some money. It’s a job that can fit well into their schedule before or after school. Plus, they can get good exercise at the same time!
It’s usually pretty simple: they take newspapers and deliver them to people’s homes.
When I was younger, I had a friend who had a delivery route. Once, I went along with her and helped her deliver some newspapers. It was hard work but she ran it smoothly!
If your kid is interested in this job, start by checking with local newspapers. Call them and ask if they’re looking for delivery helpers. Some things they might need:
A bicycle or a reliable way to get around the delivery area quickly
A bag or basket to hold the newspapers as they deliver them
An early morning start if the paper is a morning edition
To dress for the weather, since they will be outside
They will learn responsibility by making sure the newspapers are delivered on time.
Sometimes there may be age limits, so if your child is younger, they might need to get a work permit. But often, kids as young as 11 or 12 can start with a bit of paperwork.
20. Sell used toys
Recently, I was on Facebook, and a parent was helping their child host a garage sale. They were letting their child take control of most of the sale, but the parent was posting about it in the group to get more traffic to their yard sale.
They were selling the kid’s used toys to help them declutter and make some extra money. I thought this was a great idea!
Kids can learn the basics of entrepreneurship by organizing and pricing their toys for sale. This activity not only teaches them about value assessment but also introduces the concept of supply and demand as they observe which toys are more popular among buyers.
People pay good money for used toys all the time, so this can be a great side hustle to get into.
21. Face painting
Face painting can be a fun and profitable small business venture for kids who love art and painting. They can start by setting up a face painting booth at local events or birthday parties.
Running a face painting business encourages kids to develop their entrepreneurial skills, from marketing their services to managing customer interactions.
22. Recycling collector
Kids who care about the environment can turn it into a business by collecting recyclables. With a passion for keeping things green, they can offer to gather recyclables from neighbors, schools, or local businesses.
This not only helps the environment but also teaches kids about reducing waste and recycling.
23. Vending machines
I have been seeing more and more parents starting vending machine businesses for their children.
Getting kids into the entrepreneurial world by running vending machines can be an interesting and educational small business idea. Whether they decide to place machines in school common areas or local community spaces, managing a vending business can help teach children valuable lessons in supply and demand, handling inventory, and understanding customer preferences.
Running vending machines also gives kids a chance to learn about financial responsibility as they handle income, expenses, and profit calculations.
Recommended reading: How To Start A Vending Machine Business
Frequently Asked Questions
In this section, you’ll find answers to common questions about starting a business as a kid.
What is a good business to start as a kid?
Starting a business that fits into their hobbies and interests makes a good choice. For instance, if they like technology, they might try starting a blog or YouTube channel. If they love the outdoors, then a lawn mowing or gardening business might be a better fit.
How can a kid make $100 dollars fast?
A kid can make $100 fast by selling their old toys or clothing items that they already have. You, the parent, can help them organize a yard sale or gather their items to sell in a Facebook buy/sell group.
What can kids sell to make money?
Kids can sell a lot of different things to make money, such as jewelry, paintings, greeting cards, homemade cookies, lemonade, used toys, and more.
What kind of businesses can young students start at school?
They can start businesses at school like a pencil and eraser store, a book swap service, or a snack bar (if the school allows it). Just remember to check in with the school’s rules to make sure their business idea is allowed on the school campus.
What steps can a child take to start their own business?
Here are steps a child can take to start their own small business:
Identify interests and skills – This will help them find a business idea that they actually like.
Research business ideas – Research different small business ideas suitable for kids and think about factors like their age, skills, and the resources available.
Create a business plan – Develop a simple business plan outlining the business idea, target audience, products or services offered, and basic strategies for marketing and sales.
Learn basic business – Introduce the child to basic business concepts such as budgeting, pricing, and customer service, and this can be done through discussions, educational resources, and more.
Decide on pricing – Teach your child about pricing by thinking about the cost of materials, time, and possibly profit. This helps them understand the value of their products or services.
Market the business – Your child could create posters, use social media with parental supervision, or spread the word within the local community such as by placing an ad on a local bulletin board.
Provide good customer service – I highly recommend making sure that you teach your child the importance of treating customers with respect and giving great service as this can lead to repeat business and word-of-mouth referrals.
Track finances – Teach the child basic financial management, including tracking income and expenses.
Celebrate achievements – Celebrate small victories and milestones to keep the child motivated and proud of their entrepreneurial journey.
Throughout this process, parental involvement is so important. Parents can guide, supervise, and provide a supportive environment for the child’s business, making sure it is a positive and educational experience (and safe!).
Can a 9 year old make a small business?
At around 9 years old, they can start businesses that use creativity and simple skills. For example, making greeting cards or friendship bracelets.
What business can a 10 year old make?
There are many things that a 10-year-old can do to make extra money. A 10-year-old can start a lemonade stand, sell crafts, do yard work, and more.
How can an 11 year old make cash?
There are many things that an 11-year-old can do to make extra money. An 11-year-old can rake leaves, walk dogs, sell baked goods like cupcakes, and more.
What are some simple business ideas for children under 12?
Younger kids can think about businesses like lemonade stands, which are simple to set up and manage. They also might create and sell craft items or start a pet sitting service for neighbors if they enjoy spending time with animals.
How can a teenager make money online?
A teen can make money online by blogging, offering online tutoring services, selling printables on Etsy, reselling items online, and more. I recommend reading 17 Online Jobs For Teens To Make Money to learn more.
How can children stay safe when starting a business?
When starting a small business as a kid, it’s important to think about safety and the rules they need to follow. For safety, always make sure they have an adult they trust to help watch over their business. If they’re selling something like food or crafts, make sure everything they use is safe and won’t hurt anyone.
For legal aspects, different places have different rules for businesses. They might need to ask for permission from someone (like you, the parent) or maybe need a permit.
They also need to make sure they have supervision, which means having an adult around to help them out and make sure everything’s going right. Monitoring what they are doing online, if they are dealing with customers, can be very smart because you never know who they are selling to or talking with.
Small Business Ideas for Kids – Summary
I hope you enjoyed this blog post about small business ideas for kids.
From traditional ways to make extra money like running a lemonade stand or mowing lawns to more modern business ideas like making and selling crafts or starting a YouTube channel, the possibilities for kid-run businesses are plentiful.
Starting a business as a kid can teach children valuable problem-solving and life skills. With the proper guidance and help, there are many different good business ideas that a kid can start.
I have been earning my own money from a young age, and it has taught me so much. I highly recommend helping your kids do the same!
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Learn investment and tax strategies to help you achieve financial security and prepare for a prosperous retirement.
How can you balance saving for emergencies and investing for the future? What strategies can you employ to maximize your tax benefits and build a secure financial future? NerdWallet’s Kim Palmer and Alana Benson discuss investment strategies and tax planning to help you understand how to navigate your financial journey effectively. They begin with a discussion of investment strategies, with tips and tricks on understanding different investment accounts like 401(k)s and IRAs, leveraging compound interest, and the importance of starting investments early. Then, Alana discusses tax planning and filing in-depth, covering the intricacies of different tax forms like W-4s and W-2s, the significance of estimated taxes for freelancers, and strategies for managing capital gains taxes.
Kim and Alana delve into retirement planning and the challenges of active versus passive investing. They provide a framework for prioritizing your finances, emphasizing the creation of an emergency fund, taking advantage of employer 401(k) matches, and understanding the role of asset allocation based on age and risk tolerance. Additionally, they tackle the decision-making process in personal finance, such as choosing between paying off debt and investing, and the pros and cons of having a financial advisor.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
Hey listener, we’ve got a special episode in store for you today. Our investing and tax Nerds recently hosted a webinar going deep into how you can level up your investing and tax strategy. So we packaged that up into a podcast episode for you. The Nerds talk about what you need to know about different investing accounts, how to get help with your taxes and more. So here’s the webinar.
Kim Palmer:
Welcome everyone. I am Kim Palmer. I’m a personal finance writer at NerdWallet where we help people make smart decisions. One important note, we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. NerdWallet Inc is not an investment advisor or broker and does not provide personal financial advisory services. Today we are excited to talk to you about the basics of investing and taxes and we think we have some helpful info to share with you. You can always find more at nerdwallet.com or on the NerdWallet app. Our goal today is to kick off a helpful discussion about investing and tax information and tools. Alana Benson writes about investing topics including stocks, funds, and ethical investing. And now I will hand it over to Alana.
Alana Benson:
Thanks Kim. Hi everyone. Thank you for joining us today. So before we start, I just want to say a couple of things that often get forgotten when we’re talking about investing. So first, investing usually comes second to some other goals. If you’re having a hard time paying for necessities or you don’t have an emergency fund, it’s really important to focus on those things before we even start worrying about investing. Second, instead of scrimping, try to increase your income. So I didn’t start investing until I was in my late 20s, and that’s because one, I didn’t work at NerdWallet yet, so I literally didn’t know anything. And two, I was making around $25,000 a year, so I didn’t have much expendable income. And when you don’t have extra income, it’s really hard to prioritize investing and it just might not even be a good idea to do that.
When I started making more money, it was suddenly a lot more possible for me to invest for retirement. So if it’s possible for you and you want to be investing more, look for jobs that will pay you more or look into side hustles, but cutting back on your streaming services probably will not save you enough money for retirement. And finally, if you don’t have the money to invest now, that’s totally fine. Some people have serious money anxieties and others just don’t have the cash. Whatever your reason is, don’t stress too much about it. Just keep learning and when you’re able to, you can start investing. So why do we invest? What is the point of all this? And the answer is that it’s because we like money and that’s okay. There’s no shame in admitting it, I like money, most people like money. It’s because money isn’t just money. It’s not like Scrooge McDuck diving into pools of money and buying Maseratis. It’s not that.
It’s about not being stressed about your money all the time and it’s about being able to buy everything that you need and some stuff that you want comfortably without having money stress take up all of your energy. Money allows us to thrive instead of just survive and investing helps you make more money than you could ever possibly make just by working at a job. So okay, what actually is investing? This whole process is very strange. Okay. Investing is the process of money that you already have making additional money for you. And this works through what’s called compound interest. Compound interest means that your gains get a little bit bigger every year and that’s also why starting when you’re younger gives you a huge advantage and more money in the long run. So for example, you just start at that little number one in the box up there. Say you buy an investment for $100, if it goes up the average stock market return of 10%, it could then be worth $110, meaning that you’ve made $10.
Then that $10 that you earned also starts earning compound interest on top of the $100 you initially invested. That doesn’t sound like much of a profit, but imagine if you were doing it with way larger amounts of money over a way longer period of time. Now that 10% is an annualized rate, which means that you’re not going to get 10% every single year. In all likelihood, some years you’re going to finish up, some years you’ll finish down. But over the course of decades when you average all that out, you tend to get about 10%. The way you actually start investing is through an investing account. And there’s a couple of different types, but the type of investment account you have is actually really, really important because a lot of them have some pretty significant tax benefits that you want to take advantage of. So you’ve got your 401(k)s and these are offered through your employer. You add money to it and sometimes your employer matches it. So it’s basically free money. If you have a 401(k), you’ll likely choose your investments from a pre-selected list or a fund that will automatically adjust itself over time.
So this means 401(k)s are typically very hands off. IRAs on the other hand are investment accounts that you open up yourself. IRAs can be opened online through brokerages and actually at a lot of large banks, they also do that. So it’s likely you can open up an investment account just through your bank. Unlike with a 401(k), IRAs you’ll have to choose your own investments in those accounts. You may have heard about a thing called a Roth IRA or a Roth 401(k) and it’s good if you know the difference. So with a Roth, you pay taxes on your money now just like any other money that you earn and then the money you have invested inside that account grows tax-free and you can take it out tax-free in retirement. With a traditional IRA or 401(k), the money you contribute today is pre-tax.
So that is you get to deduct it from your income taxes this year. So it’s like a nice little treat this year, but then when you cash it out in retirement, you’ll owe income taxes on it. This is really, really important. I’ve seen a lot of people make this mistake. Your investment account is not an investment, so a Roth IRA, a 401(k), not an investment. So if you have a Roth IRA, that’s great, but that doesn’t mean you’re actually invested in anything. So you fund your investment account and then you buy investments from there. But I’ve heard of people opening a Roth IRA, putting in a bunch of money and then wondering why it didn’t grow over the last 10 years. So you have to purchase investments for your money to actually grow and if you don’t do it, you’ll miss out on all of those years of growth, so very important.
And there’s a couple different types of investments that you can choose from once you open and fund your investment account. So you’ve got stocks, I’m sure everyone’s heard of that, these are shares of ownership in companies and the way you make money from them is if they go up in value and some pay you a cut of the company’s profits on a regular basis. Then you’ve got bonds. This is when you loan money to companies or the government and they pay you interest. Funds, now these are very exciting because they’re basically just baskets of stocks and bonds that you buy all at once. So a fund is still a stock or bond based investment depending on the type of fund that you get. And there’s a lot of different kinds such as index funds or exchange traded funds and mutual funds, but they’re all collections of investments that you buy at one time.
And I think funds are pretty awesome because if you own a stock and that company goes out of business, you lose all of your money. But if you invest in a fund that covers 100 stocks and that same stock goes out of business, your investment is buoyed up by the other 99 companies. So again, all of these investments, stocks, bonds and funds, you buy them from your investment account and then you own them in there. All right, so let’s talk about the stock market, it’s this weird nebulous term that’s hard to understand. But the stock market is just where people buy and sell investments, but now people just trade investments online. So the stock market is made up of several what are called market indexes. Now these are basically just predetermined lists of companies and the performance of that overall list can tell us a lot about the health of the US economy.
So for example, the S&P 500, something you probably have all heard of, that’s just the list of 500 of the largest publicly traded companies in the US and it includes companies like Apple and Amazon. So when we say the stock market is down today, that means that on average most of those companies aren’t doing well. And you can’t invest in the literal stock market, but you can invest in funds that include all the same investments. So these are called index funds because they track a market index. So again, if you have an S&P 500 index fund, it should perform pretty closely to how the S&P 500 itself is actually performing. The S&P 500 goes up 10% a year on average and 6.5% after inflation. And this is just an average, so some years the market goes up more, some years it goes down less, but when done well, investing can potentially mean doubling your money every few years for doing basically nothing, which is my favorite way of earning money, by doing nothing. It’s great.
So let’s talk strategy. This is all about the way that you invest, when you put your money in and when you take your money out. So passive investing is where you buy that S&P 500 index fund and you keep adding money into it until you retire. It’s very boring, but it’s effective. So it can give you that 10% return on average over the long haul, but a lot of people want to make more than that 10%, and they do so by actively buying and selling stocks, crypto options and other high risk investments. They try to predict when they’ll be low, then they buy them and then they turn around and try to sell them when they’re high. So these people are called active traders or day traders. Only 20% of active traders make money over a six-month period. That is not a lot of people.
There have been a lot of studies over the years that show that active investing is a way less lucrative fashion than boring old passive investing with that index fund. Plus active investing is a lot more work, you have to do all kinds of research and you keep an eye on the markets and you can hypothetically earn more by actively trading versus passively earning the same amount as that historical return of 10%. But most people end up making less when they actually try it, and that’s because people are really bad at predicting things. And in order to make money on the overall stock market over the long term, you have to be really good at predicting things all the time. So maybe you make it big on one stock, but the odds of that happening again and again are very low. So let’s put all of this information together, the accounts, the actual investments and the strategy.
Here’s how financial advisors suggest you prioritize your money when you’re starting to invest. So the first thing you want to do is you’re not actually going to invest at all. The first thing is that you’re going to have an emergency fund. So this is money that you won’t actually put in the stock market, and that’s because when your money is invested, its value can change day by day. So say you have $1,000 and you want to use it for an emergency fund, but you invest it, when you have to fix something on your car suddenly, you go to check your money and its value could be $600 instead of $1,000 and that’s not good. If you put it in a high yield savings account, you can access that money at any time without risking its value. Plus right now the interest rates are really high.
So your money could be earning 4 to 5% just by sitting there. So next, you want to get that 401(k) match if it’s available to you because it’s free money. After that, it’s a good idea to look into IRAs. Both IRAs and 401(k)s have what’s called a contribution limit, which is just the maximum amount of money you can put in each of them every year. If you’re able to max out an IRA, then it’s a good call to move back to your 401(k). And the reason you switch around like that is because of the way the tax benefit works. So it’s likely more beneficial to invest in an IRA over a 401(k) if you’ve already gotten your match, if you have to choose between the two. Then if you max out your 401(k), you can move to a standard brokerage account. And this is not a list of everything you have to be doing right now.
You might be thinking, “Whoa, maxing out an IRA is $6,500, I cannot afford that”, and that is totally fine. So I like to picture it as a waterfall. So when you fill up your emergency fund, then you can start working on getting that 401(k) match. Only after that bucket is full should you then move on to investing in an IRA and so on. And wherever you’re at in your bucket filling journey is okay. It’s just nice to know what to do next when you’re ready for it. So we already talked about what accounts to invest from and the investments you can buy, but then do you just start buying a bunch of index funds or stocks or bonds? How do you know how much of each investment to get? And that is all about risk tolerance. And to understand that we have to understand how risk works over time.
If you’re investing for retirement and you’re in your 20s now, that means you have a ton of time for your investments to grow and then drop dramatically and then rise back up. So financial advisors would say you can afford to take on a bit more risk, AKA invest in riskier investments, because you have time for your investments to bounce back. Now, if you’re investing for your retirement and you’re 65, you don’t want to risk all the money you’ve been investing for years and years because you’re going to actually need to use it to pay for stuff in retirement pretty soon, so you want to protect it. And figuring out how much of each investment you should have is a fancy term called asset allocation, but it just means how much of your portfolio is in which of these investments.
And age is just a number, but typically when you’re younger, you may be able to afford to take more risk because you have more time for the stock market highs and lows to even out. So stocks, and okay, remember index funds and mutual funds are often made up of stocks so those count too, but those tend to carry more risk than investments like bonds. And an example of a 20-year-old’s investment portfolio, which includes all of your accounts so your 401(k), your Roth IRA, all of that together, that could be 100% stocks. And that’s fairly risky, but those 20 year olds are not going to retire for a long time. Now, a 65-year-old might have way more bonds because they don’t want to risk all that money they’ve earned over time. And one thing some investors do to mitigate risk is to slowly shift their asset allocation from high risk investments to low risk investments over time.
And again, I’m not a financial advisor and this is not personalized investment advice, but how much of each investment it’s good to have will usually depend on how much risk you are willing to take. And an investment portfolio can be really simple or really complicated. So you could have that one S&P 500 index fund and you purchase it from a Roth IRA, and that’s just all you do. Just if you want to keep it really simple or you can make it more complicated. So maybe you explore several stock-based funds such as international stocks and healthcare stocks and technology stocks, and you could invest in those types through a fund. So instead of buying 30 technology stocks, you just have one technology stock fund, then a small slice in bonds, and then an even smaller slice is crypto or other high risk investments. Though financial advisors have varying opinions on the safety of crypto.
So keep in mind, this is just an example and not necessarily what you should do personally, but it is really helpful to look up asset allocation portfolios through an online brokerage and see what they recommend for your specific age and when you plan on retiring. You can also talk with a financial advisor who can help guide you through those decisions. And investing is great because it can help you earn wealth, which you could spend on a boat, but more than likely one of your biggest investing goals will be retirement. And the sad truth is that in some things like retirement, they just cost so much that you’ll probably never afford them just by putting money in a savings account. And that’s why we say we have to invest for retirement. And the truth is that most people just aren’t saving enough for retirement.
So you’ll probably have a lot of expenses and you have to pay for that in retirement and some of it’s necessary like food or housing or medical care and some of it is travel or bucket list stuff, but you may not be working anymore or at least not as much as you were. And once you factor in inflation, it’s likely that a dollar today will be worth way less when you’re in retirement. And saving for retirement has gotten even more difficult because you can’t necessarily afford to live on social security. Medicare doesn’t always pay for your health needs and pensions aren’t really as common as they used to be. And because of all this, it’s really important to start investing for retirement sooner rather than later.
And if you’re early in your career, it might seem silly to worry about retiring right now, but if you start investing sooner, you actually spend less on retirement than if you start investing later in life overall and that’s because of compound interest. So our retirement calculator shows that if you start putting away $100 per month, that could grow to nearly $400,000 in 35 years. And it’s always good to know how much you should be trying to invest. When you have a long-term goal in mind, you want to know what that number is. So a retirement calculator can be a big help to figure that out, including NerdWallet’s retirement calculator. No shame, I’m going to plug it, but some financial advisors recommend saving 15% of your pre-tax income for retirement. So okay, let’s break that down. What does that look like?
So if you make $100,000 a year, again just because easy math, that would be $15,000 annually that you’re trying to save for retirement. But if you had a 5% match on your 401(k), you’d already be saving $10,000 a year between the $5,000 you make and the $5,000 your employer puts in. And then if you contributed another $5,000 to your Roth IRA, you’d already meet your target goal of saving $15,000 a year for retirement. You should also think about how much you can make during those peak earning years. If you’re younger, what career are you looking to have? You can look up what those wages tend to look like on a site like Glassdoor or ask someone in your life who is in that career path, and maybe do that tactfully because you’re asking about money. But figuring out what you want to be when you grow up may not be something you want to think about right now.
But to be honest, I studied English in college and no one told me about my job prospects. I figured that I would have to write a super famous book or be a teacher and you don’t have to have everything figured out now, but it doesn’t hurt to see how much a potential field could earn and figure out what careers are open to you. And just keep in mind that relationship between your earnings and investing like we talked about in the beginning. And if you’re later in your career, it is harder to take advantage of compound interest, but some of those investment accounts have those catch up contributions that we talked about so you’re able to contribute more after a certain age. Thank you all so much for listening to me talk very fast for a long time, and now I will hand it back over to Kim to talk about taxes. Thanks so much.
Kim Palmer:
Great, thank you so much, Alana. That was great. Someone actually asked in a pre-submitted question, “Why do I have to pay taxes?” Well, here is why. Taxes are used to pay for a lot of different things like clean water, roads, schools, healthcare, and the military. And your tax return is due every year in mid-April to the IRS. We’ll talk a little bit later about what to do if you need an extension, but in general that is the deadline. But first, let’s back up a little bit. When you file taxes, there is so much paperwork. One really important one is the W-4. That is the document that your employer asks you to fill out when you start a new job. And it plays a really big role in telling your employer how much in taxes to take out of each paycheck. It asks you things like your filing status, dependents, how much tax to withhold, and if you get a really big tax bill or a big refund, then you might want to go back and revisit your W-4 just to make sure you’re withholding enough but not too much.
There’s also the W-2, which is a document that your employer sends you to summarize how much in total they took out of your paycheck the previous year, and you’ll need to reference all those numbers when you file your tax return. If you are self-employed or you work a side hustle, then taxes won’t be automatically withheld from your paycheck, and that means you might have to pay something called estimated taxes, which is typically four times a year. In January, you’ll get something called a 1099 form that outlines how much money any company paid you, and then you’ll use that information when you file your return. And then finally, the 1040 is the main form you use when you file taxes, and we’ll drop a link in the chat for more about that. Okay, so you have all of your forms set. How do you actually file your taxes?
You can do it yourself through the IRS. You can use an online tax prep software or you can use a tax professional like an accountant or a tax preparer. If you do it on your own, you can either use paper forms or get access to brand name tax prep software through an IRS service called Free File. But it’s important to know that only people who make below a certain income qualify for the Free File program. If you use tax software like TurboTax, H&R Block or NerdWallet Taxes powered by Column Tax, many of these providers use a Q&A style to help you do your taxes and some even offer paid upgrades that connect you directly to a tax professional. If your finances are really complicated and you want some extra help, then you can also work with a tax preparer such as a certified public accountant.
You do want to make sure to ask them lots of questions and check their credentials before you agree to share your financial information. And you also want to check to see if they have a prepared tax identification number, which is an ID that’s required for anyone who files tax returns for compensation. The US does not have a flat tax system, and that means that portions of your income can be taxed at different rates. There are currently seven tax rates for federal income taxes that run from 10% to 37%. And which tax rate applies to you depends on your income and your filing status. So you might hear people say, “I’m in the 12% bracket” or “I’m in the 22% bracket”, but being in a tax bracket doesn’t mean you pay that tax rate on everything you make. And in reality, people’s income can fall into several different tax brackets depending on how much they make.
Portions or chunks of your income are taxed at different rates and some of those different taxes are then added together. So for example, some of your income could be taxed at a rate of 10%, another chunk could be at 12%. The more you make, the higher the tax rate might be on some of your income. And depending on the state where you pay your income taxes, you might pay a flat rate or a progressive rate similar to the federal structure. A small handful of states have no state income tax. If you want to pay less, you can look for tax breaks. Tax credits and tax deductions are two tools that can help you potentially minimize your tax bill, but they do work in different ways. Tax deductions reduce your taxable income. As a simplified example, a $25,000 tax deduction on $100,000 of taxable income means that only $75,000 of that income will get taxed.
Tax credits directly reduce your tax bill by the value of their credit. So this means if you owe $2,000 in taxes and you’re eligible for a $1,000 tax credit, you’ll end up owing $1,000. Tax credits tend to be more valuable because they have the potential to pack a bigger punch, so you definitely want to try to take all the tax credits you qualify for, and you could even get money back if a credit is refundable. Common tax credits include the earned income tax credit, the child tax credit, the lifetime learning credit, and the American opportunity credit and savers credit.
All right, I alluded to this at the beginning, but what happens if you’re not going to be ready by mid-April? What do you do? If you know you won’t be able to file on time before tax day, you can file for a free extension with the IRS and that gives you until mid-October to file your return. But you want to make sure that at least 90% of what you think you’ll owe in April is covered by an estimated tax payment or your withholdings. Otherwise, the IRS can hit you with a penalty for late payment. The failure to pay penalty is really no joke. It’s 0.5% of your unpaid taxes each month your payment is late plus interest. If you file late and you did not file an extension, you could also get hit with a failure to file penalty, which is 5% of your unpaid taxes each month that your payment is late. There is some good-ish news, if you file late but you don’t owe anything, you won’t get penalized but that doesn’t mean you’re not still obligated to file.
If you don’t, the IRS could file a return on your behalf and you might miss out on a refund if you’re owed one. And if your tax bill is so high that you can’t pay it off, you do have options. You can set up a long-term or short-term payment plan with the IRS.
I know that was a whole lot of information and taxes can seem scary, but we break down lots of popular tax questions and terms on nerdwallet.com. We have some time to address some pre-submitted questions from the audience ranging from about Roth IRAs to the pros and cons of having a financial advisor. And I do want to give a reminder here as we answer these questions that we are not tax or investing advisors. We are writers who focus on these fields and what we say is not investing or tax advice. So with that said, let’s dive into these questions. A question that came to us in an email was: how do you choose between paying off credit card debt and investing in saving for emergencies?
I really love this question because I think it speaks to some of the biggest challenges of personal finance, navigating these choices. And the answer is it’s really up to you. Many financial advisors say that the first step is to create a starter emergency fund, and you can read more in our article that we’ll link to, Should I Pay Off Debt Or Save? And you’ll see most people think about saving $500 to $1,000 first and then after that to consider contributing enough to a workplace retirement plan if they have access to one, and then contributing 3% to 5% of income to an IRA or a Roth IRA. And then financial advisors say people can consider focusing on paying off high interest debt and amp up investing efforts once they have paid that off. And now Alana, I’ll turn over to you. Perhaps you can answer the questions about Roth IRAs.
Alana Benson:
Absolutely. So a couple folks were wondering, before we went over everything, what a Roth IRA is and how does it work and when is it worth it to open one? So we already covered this a little bit, but again, it’s an individual retirement account and it lets you contribute money that you’ve already paid taxes on. So think about when you get your paycheck. That money has already had taxes taken out of it. So once you hit age 59 and a half and you have held the Roth IRA for at least five years, you can withdraw your contributions and any earnings, which is a fancy word for money that you earn from investing, without paying taxes again. And whether it’s worth it is up to you, especially if you’re trying to decide between a Roth IRA and a traditional IRA because it’s about when you pay those taxes and if you have a traditional IRA, you do get that tax break right now.
So that’s a personal decision. But you can also take out money tax-free from your Roth IRA later in life. So if that’s something that you are really trying to parse out, it might be good to talk to a financial advisor because they can help you with that question. We had two other questions. The first one is: how do you calculate how much money to put in your Roth IRA if you make over the maximum amount? So we didn’t actually cover this, so Roth IRAs do have income limits, but there is something called a Backdoor Roth that lets you contribute money first to a traditional IRA, pay taxes on it and then roll that money into a Roth IRA. And then our last question is: what are the pros and cons of having a financial advisor and how do you find one?
This is such a good question. The pros and cons really depend on your situation. The catchall term ‘financial advisor’ is used to describe a wide variety of people and services, including investment managers, financial consultants, financial planners. First and foremost, you always want to verify a financial professional because financial advisor doesn’t require people to be vetted. Certain things like a certified financial planner or a CFP, those actually have a very high level of education and have a certification that you can verify online. So anyone that you are talking about money with, you want to make sure that you are vetting them. And some of these people can just talk to you about your finances and some of them can actually manage your investments for you if you want that. Financial advisors, depending on the kind that you choose, can be pretty expensive. A robo-advisor is like an AI version of a financial advisor.
You just set up an account for one and then they charge you a pretty modest fee. And based on your age and your risk tolerance, it will manage your investments for you. An online financial advisor can offer more services and you can actually talk to a human being, but those do tend to cost a little bit more. And then you could go to an in-person financial advisor, depending on their credentials, that might cost even more, but sometimes it’s really nice to talk to somebody that you know and you can grow that relationship with them over time.
Kim Palmer:
Great. Thank you, Alana. And I think, actually, I can squeeze in one more question that we received. How do taxes work with investment accounts? How much do we set aside so we aren’t surprised by a tax bill? Which is a great question. If you’re selling stocks from a brokerage investment account, then you should be aware of three words, capital gains taxes. Those are the taxes you’ll pay when you sell assets for profit. Assets that you have owned for more than a year are subject to long-term capital gains tax, and the capital gains tax rate is 0%, 15% or 20% on most assets. Capital gains taxes on assets held for a year or less are subject to short-term capital gains. If you regularly trade stocks or other investments, you might be subject to short-term capital gains.
Those profits are taxed as ordinary income based on your tax brackets, which we went over before. Your final tax bill depends on a number of different factors. If you don’t want to be surprised, estimate what you’ll owe using tools such as a tax calculator or IRS worksheets. If needed, consider setting aside enough to cover the tax bill or paying estimated taxes and as always, your specific situation will differ and we are not tax professionals. We hope that you enjoyed this webinar and learned something today. If you’d like to get even more clarity on your finances and continue learning with NerdWallet, consider signing up for an account with us at nerdwallet.com. Thank you so much for joining us.
Sean Pyles: And that’s all we have for this episode. To send the Nerds your money questions, call or text us on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. Here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. This webinar episode was produced by Alikay Wood, Sheri Gordon, and me. We had editing help from Liz Weston, Sara Brink mixed our audio, and a big thank you to NerdWallet’s editors for all their help. And with that said, until next time, turn the Nerds.
Looking for a real estate side hustle? Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles. I have done a few different real estate side gigs, and I know many people who have side hustles in this…
Looking for a real estate side hustle?
Whether you are looking for passive income ideas or if you are looking for a part-time job (or more!), there are many different real estate side hustles.
I have done a few different real estate side gigs, and I know many people who have side hustles in this area as well. To get started in real estate, you don’t have to spend a lot of money – there are several real estate side gigs that can be started even if you are brand new or are on a budget.
Key Takeaways
Real estate side hustles have a range of options from income generating assets to freelance opportunities to office jobs.
You can supplement your income with both short-term and long-term real estate strategies.
Finding the right fit depends on your availability, investment capacity, and financial goals.
Best Real Estate Side Hustles
Here’s a quick summary of some of the different best real estate side hustles:
House hacking: Buy a property, live in one unit, and rent out the rest.
REIT investing: An easy way to start investing in real estate with less capital.
Airbnb rentals: Rent out a spare room or an entire property on a short-term basis.
Property management: If you’re organized and good with people, managing properties for others could be a perfect fit.
Long-term rentals: Becoming a landlord can generate steady cash flow.
Fix and flip: Buy properties that need work, renovate them, and sell them for a profit.
Below, you will read the full list and learn more about each one.
1. House flipping
Flipping houses can be a good real estate side hustle if you like real estate and enjoy fixing things up.
When you flip houses, you’re basically buying homes, making them better with repairs and upgrades, and then selling them to make more money.
The first thing to do for a successful house flip is to find a property that can be made better, such as by looking for homes in neighborhoods that are getting better or have room to grow. Think about things like where it is, what the market is like, and the condition of the property.
Before putting money into anything, it’s important to carefully look at the finances. You’ll want to figure out how much it will cost to buy, fix, and keep the property, and think about things like the cost of materials, paying workers, getting a loan, and the costs while you’re fixing things.
To flip a house well, you need to make smart changes that make the property better, without spending too much, by concentrating on important areas like the kitchen and bathrooms, and fixing any big problems with the structure or safety.
Recommended reading: 10 Best Books on Flipping Houses To Make Money
2. Investing in REITs
Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate. They are a way for you to invest in real estate without directly managing or owning properties.
An REIT is like a company that owns and takes care of real estate that makes money. They sell shares of this company to people, kind of like how stocks work.
When you invest in REITs, you can earn money from the real estate world without actually owning any property. So, if you don’t want to deal with being a landlord, this could be a good option. It’s way less work than owning property and handling it yourself.
You can even spread out your money and invest in different kinds of properties with REITs, like houses, offices, factories, and stores.
3. Getting a roommate
Getting a roommate in your home, whether that be a full-time roommate or renting out an extra room in your home short-term on Airbnb, can be a great real estate side hustle that doesn’t require very much work from you.
The earnings you can make from having a roommate depend on things like:
Where your home is (an expensive area? rural?)
The space you are renting to a roommate (for example, do they get their own bathroom? private entrance available?)
To find a roommate, you can share about it on your own Facebook page, put up an ad on sites like Craigslist, or make a rental listing on Airbnb. There are lots of places where you can let people know you’re looking for a roommate.
I have had many roommates in the past when I was younger and had a home with spare bedrooms. I would rent them out to long-term renters and people that we personally knew (such as friends and my sister).
Recommended reading: Tips For Renting A Room In Your House.
4. Airbnbs and vacation rentals
Turning your property into an Airbnb or other short-term rental can be a way to generate extra income. This is when you rent out your space, whether a full house, an apartment, or just a room, to travelers for short stays.
Before starting your Airbnb side hustle, be sure to:
Check local laws: Make sure short-term rentals are permitted in your area. There are many areas nowadays that are more strict when it comes to short-term rentals.
Understand the financials: Calculate potential earnings against expenses like mortgage, utilities, and maintenance.
Set up your space: Furnish and decorate to create a welcoming environment.
Market your rental: Use high-quality photos and create listings on rental platforms like Airbnb and Vrbo.
The amount you can earn can vary, with some hosts making around $5,000 to $10,000 a month or more, but this depends on factors such as location, rental type, and occupancy rates. Always plan for occupancy ebbs and flows – it’s part of the short-term rental business.
5. Real estate photography
If you’ve ever looked at a house listing and thought that the pictures looked awful, then this may be the real estate side hustle for you.
Real estate agents many times hire out for the photography side of selling a house, as they know and understand how important good pictures are.
Real estate photography is all about taking pictures of houses and spaces to grab the attention of people who might want to buy them. Real estate photographers might take pictures of the outside of a house, the backyard, the living room, attic, bathroom, and more.
You can start with the equipment you likely already have, like your smartphone, which can work well because phones these days have great cameras.
How you show a property can really impact a client’s chance of selling it. Your photos are not just pictures; they’re an important part of how the property gets advertised.
As you continue with this real estate side hustle, you might think about getting better equipment (like a real camera!), but for now, practice paying attention to details and getting better at taking pictures.
If you’re thinking about doing something extra to earn money in real estate, photography could be a great choice.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
6. Real estate drone photography
Drone pilots sell real estate photography services to help real estate agents showcase the properties they are selling.
When property listings include pictures from various angles and heights, it gives a different perspective compared to regular photos. This helps show aspects of real estate that traditional pictures might miss.
When you sell property photography services using your drone, you’re providing a valuable service to real estate companies that want to stand out in a crowded housing market.
Homes are increasingly being sold using drone photos, and it’s understandable because they can showcase the surroundings of a home. Also, potential home buyers can see the entire property and house through a drone picture, giving them a better understanding of what the home includes.
Recommended reading: How To Make Money With A Drone
7. Long-term rentals
A long-term rental is when you rent out a property for a long amount of time, usually six months to a year or even longer. An example would be renting out an apartment or house to a family to live in full-time.
Long-term rentals are different from short-term rentals like vacation homes or Airbnb listings. They are meant for people or families looking for a longer place to live.
A benefit of long-term rentals is the reliable and steady income they can give you. When you rent your property to tenants for an extended period, you set up a regular cash flow of rental payments. This stability can be especially nice for people who are looking for a dependable source of passive income.
Plus, it’s usually less work than a short-term rental, because you don’t have to clean the home every few days or find new people to rent out to.
Recommended reading: How This 34 Year Old Owns 7 Rental Homes
8. Buy and hold for long-term wealth
If you want to grow wealth through real estate, the buy-and-hold strategy is a way to achieve lasting growth. This means buying a property and keeping it for an extended period, benefiting from both its increasing value over time and the rental income it makes you over the years.
Some positives to think about with a buy-and-hold real estate side hustle include:
Appreciation: Over time, real estate often increases in value.
Rental income: It can provide a steady cash flow each month.
Tax advantages: Possible deductions can reduce your taxable income.
The buy-and-hold strategy requires patience and a willingness to handle market changes. It’s a long-term approach, not a quick one, but if you stay persistent, you can create an investment portfolio for future financial stability.
9. Notary services for real estate
If you want to get more into the real estate world without becoming an agent or broker, becoming a notary public can be a way to make extra money.
Many documents, including deeds, mortgages, and power of attorney, require notarization to be legally binding.
With a notarization license, you can provide an important service required for different real estate transactions.
Notaries are important because they help make sure that the people signing documents are who they claim to be to prevent fraud.
10. Rental arbitrage
Rental arbitrage is a way to make extra money in real estate without owning a property. You rent a place for a long time and then sublease it as a short-term rental using platforms like Airbnb.
Here’s how to get started:
Check local laws: You’ll want to make sure your city or state allows for short-term rentals.
Make sure the rental allows for you to do this: Not every rental will be okay with you renting it out. You will want to read your rental contract carefully.
Do market research: Understand the demand for short-term rentals in your target area, such as by looking for locations with high tourist traffic or business conferences.
Potential Benefits
Considerations
+ Strong cash flow potential
– Initial setup and furnishing cost
+ Low startup costs compared to buying
– Dependence on short-term rental market stability
Making money in rental arbitrage comes from the difference between the cost of the long-term lease and the income from short-term rentals. The bigger the gap, the more potential for profit. But remember to factor in the expenses of running the rentals, like cleaning and maintenance costs.
11. House hacking
House hacking is a strategic approach to real estate where you purchase a property with multiple units and live in one unit while renting out the others. This is a side hustle because it can help offset your living expenses through the rental income.
House hacking can be an easy starting point if you want to dip your toes into real estate investing with the added perk of reducing your personal living expenses.
Back when we were living in a traditional house, we house hacked for a little while and had a few different roommates live with us. The monthly rent we collected allowed us to lower our house payments and put more money in savings.
We house hacked with our first house, and it was really great for us. Being able to set more money aside even helped me get ready to quit my job to become a full-time blogger.
If you are looking for a good book on the subject of house hacking, then I recommend reading The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom by Craig Curelop.
Recommended reading: What Is House Hacking & How To Live For Free
12. Real estate agent
A real estate agent is a person who helps people, like you and me, find real estate to buy or sell. They usually earn their income through a commission, which is a percentage of the property’s sale price.
To become a real estate agent and start this real estate career, you only need a high school diploma and a professional license. As of 2021, the median pay, according to the U.S. Bureau of Labor Statistics, is $23.45 per hour, or $48,770 per year.
And, there are tons of real estate agents who make a lot more money than this.
13. Crowdfunding and peer-to-peer lending
If you want to learn how to make extra money in real estate, then crowdfunding and peer-to-peer lending are areas to look into.
Crowdfunding platforms allow you to invest in real estate deals with a smaller amount of money compared to purchasing property outright. This can provide you with passive income through rental returns or potential property value appreciation.
Peer-to-peer lending platforms enable you to lend money directly to borrowers. You can potentially earn higher returns compared to traditional savings accounts, but there is always the risk of a borrower not repaying the loan.
Both crowdfunding and peer-to-peer lending utilize technology to connect investors with individuals seeking funding.
14. Bird dogging
Bird dogging in real estate can be a side hustle where you help find potentially profitable properties for investors. Your skill in spotting undervalued or distressed properties is important.
Here’s what you usually need to do:
Conduct market research to locate properties that are flying under the radar.
Build a network with local real estate investors who are looking for deals.
Learn to use the Multiple Listing Service (MLS) to spot opportunities.
Typically, you’ll be on the lookout for foreclosures, bank-owned properties, and distressed homes due for a quick sale.
As a bird dog, your compensation usually comes from a referral fee after the investor decides to move forward with your find. Importantly, to perform this role, you don’t necessarily need any initial capital, just the time and skill to identify promising investment opportunities.
15. General contractor
General contractors handle the day-to-day activities on construction sites, overseeing tasks from residential remodels to constructing new homes.
This is typically more of a full-time job, but this can sometimes be done as a real estate side hustle.
As a general contractor, you can choose projects that match your schedule and interests, providing flexibility. Despite the responsibilities, this role allows you to play a central role in turning plans into actual buildings, giving you the potential to make extra money.
16. Flip raw land
Getting involved in raw land flipping is when a person finds and buys undeveloped land to sell later at a profit.
The main benefits include a lower initial investment and less complexity compared to traditional real estate investments, as it doesn’t involve renovation or improvements. There are no buildings, instead it may be a lot or acres of land.
Here’s a step-by-step guide on how to start:
Find raw land – Research areas with potential growth or upcoming developments that could boost land value.
Due diligence – Perform thorough checks on land titles, zoning laws, and road access to avoid legal issues.
Pricing strategy – Your selling price should be attractive enough for buyers yet ensure you make a reasonable profit margin.
Sell and negotiate – Use online platforms to reach potential buyers and negotiate the best deal.
17. Rent out your storage space
If you have unused land or space in your home, renting it out for storage space can be an easy way to make passive income.
People have a lot of stuff, and they will pay you to store their stuff in your unused spaces.
You can sell storage solutions for vehicles, boats, personal belongings, and more. You can rent out your parking space, closet, basement, attic storage, and more.
A site where you can list your storage space is called Neighbor and you can earn $100 to $400+ each month. This depends on the demand in your area and the type of storage space you are renting out.
Recommended reading: Neighbor Review: Make Money Renting Your Storage Space
18. Property manager
A property manager side hustle can be a great way to make extra money.
A property manager is a real estate professional who finds and oversees tenants, collects rent, and handles repairs and maintenance activities. It’s a side hustle that property owners pay for because they may not have the time or skills to effectively manage their own property.
Property managers can manage long-term rentals like apartments, short-term rentals like Airbnbs, and even commercial spaces as well.
I have a friend who is a property manager on the side of his full-time construction job – he manages many different types of properties, from second homes to vacation rentals to someone simply being out of town. He checks on their properties to make sure that everything is running smoothly.
19. Home stager
If you’re passionate about real estate and design, starting a side hustle as a home stager could be profitable for you. As a home stager, your job is to improve the appearance of a home before it’s listed for sale.
This often results in faster sales and higher prices, making your service valuable to sellers.
You can start by staging homes for friends or family, if possible, to build a portfolio. Before and after photos are powerful tools to showcase your work.
You can even provide consultations to homeowners who prefer to do the actual staging themselves. In such cases, your design style can be a more budget-friendly option for a do-it-yourself homeowner.
20. Home inspector
We recently bought a house, and our home inspector was actually a home inspector on the side – this was his real estate side hustle! I think he was a city inspector (or something similar) full-time, so he was very knowledgeable in the area.
Home inspection as a side job can be a strategic move if you’re interested in real estate. This job allows for flexibility since you can set your hours, such as by completing home inspections on the weekends or before or after your day job.
You’ll need to invest in proper training and get licensed, which is a process that can be completed relatively quickly.
The responsibilities of a home inspector include:
Inspecting homes for possible problems, like a leak or bad wiring.
Creating and delivering reports based on what you find during the inspection.
21. Real estate appraiser
Real estate appraisers determine the fair market value of a property, and this process is important in transactions, such as home sales and refinances.
Appraisers assess property values by taking notes on unique characteristics and comparing them with similar properties that have sold recently.
They then prepare reports, detailing findings and providing a valuation that banks and other institutions depend on for loans.
22. Real estate wholesaler
Real estate wholesalers are middlemen who find properties under market value, contract them with the seller, and then sell the contract to a buyer, often an investor. Their profit comes from the difference between the contracted price with the seller and the amount the buyer pays.
Here is a quick summary of what a wholesale real estate side hustle is:
Find a distressed property – Search for properties that can be bought below market value.
Evaluate the property – Determine the After Repair Value (ARV) and estimate repair costs.
Secure under contract – Enter into a contract with the seller, giving you the right to purchase.
Find a buyer – Locate an investor interested in buying the contract.
Assign the contract – Transfer your purchasing rights to the investor for a fee.
By becoming skilled at finding good deals and building connections with trustworthy investors, real estate wholesaling can become a profitable real estate side hustle.
23. Start a real estate blog
Starting a real estate blog (or even a real estate YouTube channel or social media account!) can be a good way to make extra money without having to spend a lot of money.
With a real estate blog, you can write about local market insights, home buying and home selling tips, property investment strategies, home improvement and DIY projects, and more.
I have been a blogger for years, and I really love it. I am able to create my own schedule, decide how I make money online, travel whenever I want, and more. And, it all started on the side of my day job – so I definitely think that a real estate blog can be started as a side hustle.
Learn more at How To Start A Blog FREE Course.
Frequently Asked Questions
Below are answers to common questions about real estate side hustles.
Can real estate be a side hustle? Is real estate a good side hustle?
Yes, real estate can be a lucrative side hustle. Many people do real estate activities on a part-time basis, which can include short-term rentals, getting a roommate, and more, with lower time commitments.
Is real estate worth it as a side hustle?
Real estate as a side hustle can be worth it if you are looking for more income streams and have an interest in the housing market or real estate. As you probably noticed above, there are many different kinds of side hustles, so the amount of money you can earn or the amount of time you will spend will just depend on the gig you choose.
How can realtors make extra money?
Realtors can make extra money by managing rental properties, taking part in real estate crowdfunding, selling real estate photography services, and more.
Is real estate a good side hustle for teachers?
Yes, real estate can be a good side hustle for teachers. There are many options that may work for a teacher.
For example, some teachers work as real estate agents on the side. This is possible because you can handle listing and selling homes during weekends, breaks, evenings, and over the summer. However, keep in mind that selling homes might pose challenges, as clients may require your full attention during the day, which could clash with your teaching commitments.
You can find more ideas at 36 Best Side Jobs for Teachers To Make Extra Money.
Which licenses might be required to pursue a side hustle in the real estate field?
Depending on the side hustle, certain licenses like a real estate license may be required. For example, to become a real estate agent or home inspector, you’ll need a specific license. However, if you’re looking into just getting a roommate, then you may not need a license. It all just depends on the real estate side gig you are interested in.
How to make money in real estate without ever buying any property?
As you learned above, you don’t need to personally buy or own real estate in order to make money in real estate. You can invest in REITs, become a notary for real estate transactions, include affiliate marketing for real estate products on a blog, and more.
Real Estate Side Hustles – Summary
I hope you enjoyed this article about real estate side hustles.
Picking the right side hustle gig in real estate might feel overwhelming because there are many choices.
Some people might like jobs where you have to do more, like fixing up houses or taking care of Airbnb rentals. Others might prefer making money without doing much, like through REITs or renting out a spare room.
Whatever you’re into or however much money you have to invest, there are probably real estate side business ideas that fit with what you have and what you want to achieve.
What do you think is the best real estate side hustle?
I grew up east of Rochester, in Upstate New York’s apple country. New York produces ~30 million bushels of apples per year, second among the 50 states (behind Washington).
But apples start to rot 5-7 days after they’re picked. So how does New York harvest 30 million bushels of apples in September and October without eating 30 million bushels over the following week?
The answer is cold storage.
Apples can be stored near 35°F for 6-12 months without decay. We gain an entire year of “freshness!” But first, we must put forth an effort of time, resources, and money to build that cold storage infrastructure.
Today’s effort allows us to keep more of our harvest in the long run. We get to choose our consumption schedule, not Mother Nature.
Roth Conversions
It might seem like an odd transition, but the same concept applies to Roth conversions. Today’s planning can allow us to keep more of our “harvest” in the long run. We gain control over our tax schedule rather than leaving it entirely up to the IRS.
Roth conversions are among many tools in a good “tax planning toolbelt.” Done correctly, Roth conversions allow an investor to turn high tax rates in the future into lower tax rates today. This article was inspired by Catherine (a listener of The Best Interest Podcast), who wrote me the following email:
Can you please explain the connection between RMDs and Roth conversions? Is this something I should look into? I’m 57, single, and have ~$2.3M in my 401k right now.
An Example: Required Minimum Distributions
Most retirees have heard of required minimum distributions, or RMDs, which are mandatory withdrawals that individuals with tax-deferred retirement accounts, like Traditional IRAs and 401(k)s, must make once they reach a specific age.
RMDs are forced. You must withdraw money from your 401k. Thus, the income tax associated with RMDs is forced. That’s not ideal.
Let’s use Catherine as an example. She’ll start taking RMDs at age 73 (although Congress might change that minimum age, as they’ve done before). That’s 16 years from her current age 57.
We don’t know the rest of Catherine’s scenario. Her Roth assets, taxable assets, Social Security, etc. are a mystery to us. So is her monthly spending need. All that info is essential to proper planning!
But I want to be extreme, so we’ll say Catherine’s lifestyle is wholly supported by her Social Security, taxable assets, and Roth assets. She doesn’t withdraw a single dollar from her 401k. Thus, it will grow from $2.3M today to $6M by the time she’s 73 (the assumption: 16 years at 6% per year).
Now in 2040, it’s time for her first RMD.
To calculate that RMD, we’ll look at Catherine’s year-end account value from the prior year ($6.0M) and divide it by her age-based Life Expectancy Factor. For age 73, that factor is presently 26.5. Here’s the full table of Life Expectancy Factors.
Catherine’s RMD is $6M / 26.5 = $226,415
That entire RMD is taxable as income, so her marginal Federal tax bracket is 32% based on the current tax code.
I’d bet Catherine’s account continues to grow past 2040, despite the RMD withdrawals. Her first 10 RMDs are all in the 4-5% range, and we’d expect her investment growth to outpace that. Her RMDs will grow in size. And that means she’ll be paying higher and higher marginal taxes in the 32% bracket, the 35% bracket, and potentially even the 37% bracket.
How Can Roth Conversions Help?
Paying high tax rates on RMDs is like letting your apples rot during the glut of harvest season. We need a “cold storage” to gain control over our tax rates and spread those taxes over time.
So let’s return to 2024, while Catherine is still 57 and her 401(k) is still at $2.3M. How do Roth conversions work?
First, we need to ensure Catherine’s 401(k) – which is still active – allows “in-service Roth conversions.” If it doesn’t, Catherine will have to wait until she retires and rolls over the 401(k) into an IRA.
Some simple paperwork with Catherine’s custodian will allow her to convert a number (of her choosing) of Traditional dollars into Roth dollars. Since the Traditional dollars have never been taxed, this conversion is taxable, triggering income tax.
Those converted Roth dollars will never be taxed again! That’s fantastic. But did Catherine save money? Was this a smart move?
We’d want to know all of Catherine’s personal financial details to run an accurate analysis, but we certainly need to understand what Catherine’s tax rate is today.
Her 2024 regular taxable income is $100,000, so she’s paying Federal taxes in the marginal 24% bracket. And she has another $90,000 available in that 24% bracket this year.
We can fill that ~$90,000 space in her 24% bracket with Roth conversions. Catherine would pay 24% Federal tax on those dollars today to prevent 32% (or higher) marginal tax rates once her RMDs hit. That’s the essence of Roth conversions.
Not Too Much Roth Conversion
Catherine needs to be careful not to overdo it. And so should you.
If you’re in your high-earning years and paying high marginal taxes, the odds are Roth conversions don’t make sense for you right now. There’s no reason to move extra income into your current high tax years.
But! You might have a few low-income years as soon as you retire. Your W2 income will disappear. Your financial plan might dictate you delay Social Security for a while.
Your only income might be dividends and income from your Taxable accounts and small withdrawals from your Traditional accounts. If so, fill up those low tax brackets with Roth conversions! This is a very common strategy for new retirees.
What If…?
But even as I write this article, “What if…” questions are bombarding my head.
Retirement planning withdrawal strategies are far from one-dimensional, and what I’m describing today is a one-dimensional view. I’m only focusing on a few details to provide an example of Roth conversions. Other nuanced planning questions include:
Roth conversions and (more generally) tax planning are essential aspects of retirement planning. But just two of many aspects.
A cold-stored apple a day keeps the IRS away.
Thank you for reading! If you enjoyed this article, join 7500+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.
-Jesse
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Looking for the best summer jobs for teachers? Teachers, just like students, really enjoy the summer break. It’s a great time for them to relax and feel refreshed. But, this break can also be a chance for teachers to make extra money and even start a new business. I know many, many teachers who have…
Looking for the best summer jobs for teachers?
Teachers, just like students, really enjoy the summer break. It’s a great time for them to relax and feel refreshed. But, this break can also be a chance for teachers to make extra money and even start a new business.
I know many, many teachers who have side hustles in the summer. From part-time gigs to full-time summer businesses, there are many side jobs for teachers that you may want to try out.
Best Summer Jobs for Teachers
There are many summer jobs for teachers listed below. If you want to skip the list, here are some jobs that you may want to start learning more about first:
Flexible way to freelance – Proofreading
Side job for teachers from home – Blogging
How to make passive income as a teacher – Sell printables
Work as much or as little as you want – Flea market flipping
Creative job idea – Dog treat baker
Side job for teachers in summer – Grocery shopper
Camp counselor – If you love the outdoors, being a camp educator can be both rewarding and enjoyable, combining teaching with adventure activities.
Summer school teacher – Many schools have summer classes where you can continue teaching.
1. Teach summer school
One clear way for teachers to earn extra money in the summer is by teaching summer school.
It’s a good way to use your teaching abilities and make some additional income. The best part is that summer school happens during your summer break (big surprise, right?!), so it fits well with your schedule when you’re already off from regular school.
To start, check with your local school districts. A lot of them have summer school programs, and they usually share job opportunities on their websites or local education job boards.
2. Sell educational printables
Selling educational printables is a way for teachers to earn extra money. It’s especially good for those who want to make passive income as a teacher.
Your materials, like worksheets, lesson plans, and activities, are helpful to other teachers and parents looking for high-quality educational content.
Some places to sell your educational printables include:
Teachers Pay Teachers(TPT) – This is a popular site where millions of teachers buy and sell original educational resources.
Etsy – This site is known for handmade items, but also is a great place for selling educational materials and printables.
Educational printables include things like math problems, vocabulary cards, and science experiments. They’re useful for different grades, age groups, and learning goals, making it simple to improve regular teaching or homeschooling. You can share these resources online or print them for in-person classes too.
Recommended reading: How I Make $400,000 Per Year Selling Educational Printables.
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
3. Flip used items for resale
Trying your hand at flipping items from flea markets and thrift shops can be a fun and money-making summer job for you as a teacher.
Flippers are people who find items at flea markets, yard sales, and thrift stores that are priced lower than their actual value. They then sell these items for a profit.
The summer is a great time to do this because there are typically a lot of yard sales, flea markets, and people just in general decluttering more (so you may find more things that people are giving away), where you can find items to resell.
Some items that you can buy and resell include clothing, antique furniture, collectible toys, sports equipment, electronics, rare books, jewelry, and more.
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This free workshop will teach you how to get into the flipping business. It will teach you how to resell furniture, electronics, appliances, and anything else you can find.
4. Tutor
During the summer, your teaching skills are still needed. Tutoring can be a flexible and fulfilling summer job that lets you work with students one-on-one either online or in person.
You may be able to tutor on subjects like math, foreign language, science, and more. You also may be tutoring kids, teenagers, or even adults.
To begin, you can look for tutoring jobs on online tutoring sites like Tutor.com. You can also sell in-person local tutoring sessions by reaching out to tutoring companies nearby or advertising your services on social media or in local Facebook parent groups for your area.
5. Camp counselor
Becoming a camp counselor could be a rewarding experience for you in the summer. In this job, you’d guide groups of children through indoor and outdoor activities, as well as educational programs at summer camps.
Your daily tasks would include keeping campers safe, organizing games, and giving both educational and emotional support.
Summer camps come in different types, ranging from general adventure camps to specialized ones focusing on sports, arts, or science.
6. Freelance bookkeeping gigs
If you like numbers and you’re a teacher, online bookkeeping can be a way to spend your summer.
A bookkeeper is someone who assists in managing and tracking the financial aspects of a business. They usually keep records of sales, track expenses, and generate financial reports.
People with virtual bookkeeping jobs work from home, handling their responsibilities remotely. Virtual bookkeeping is a great choice for remote work as all tasks can be completed online or with computer software, eliminating the need to go into an office physically.
Recommended reading: How To Find Online Bookkeeping Jobs
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This free training will teach you what you need to know to become a virtual bookkeeper and make money from home.
7. Swim instructor
If you’re a teacher who loves the water, becoming a swim instructor for the summer could be the perfect seasonal job for you. Your educational background gives you the ability to communicate and manage classes, which are important skills for teaching swimming.
To find swim instructor jobs:
Look on websites like Craigslist or Facebook for listings, including summer-specific roles.
Check out local community centers, pools, and summer camps.
Networking can help, so let friends and professional contacts know you’re looking.
Another job similar to this would be to become a lifeguard at a local pool.
8. Tour guide for local attractions
As a teacher, your ability to tell stories and lead can be very useful for a summer job as a tour guide. Your skill in explaining things well makes you a great choice to share history and local stories with visitors.
Check out jobs at museums, historical places, or become an ambassador for your city by guiding people to discover hidden treasures.
9. Pet care jobs
If you’re a teacher who loves animals, you may want to look into summer jobs in pet care, like being a dog walker or pet sitter. Your caring skills can easily transition to taking good care of furry friends while students are on break.
Rover is a website that connects pet owners with pet sitters and dog walkers. You can choose to do this job on weekends throughout the year or only open your schedule during the summer months – it’s your choice.
Starting on Rover is simple – you create a profile sharing your experience with pets and the services you can offer, such as dog walking, pet sitting, and house sitting.
After that, customers will send you requests, and you can discuss pricing. Rover handles the payment process, and you’ll get paid directly into your account.
Recommended reading: 7 Best Dog Walking Apps To Make Extra Money
10. Test prep instructor
As a teacher, your knowledge of academic subjects is very helpful, especially in the summer. Becoming a test prep instructor can be a great chance to help students in getting ready for their exams and earn extra money.
Test prep instructor jobs include subjects like math and English, and they cater to different education levels, from elementary school to college.
11. Sell your lesson plans
Teachers Pay Teachers (TPT) is a website made just for educators to buy and sell educational items, and it’s a well-liked side hustle for teachers. If you’ve created lesson plans, worksheets, or other teaching tools for your class, you can share them on TPT and make some extra income.
The school year may be over for you, but that doesn’t mean that you can’t create and sell lesson plans – these are bought year-round!
You can sell:
Lesson plans and unit studies
Worksheets and printable activities
PowerPoint presentations and interactive notebooks
Posters, charts, and visual aids
On Teachers Pay Teachers, the typical teacher can earn around an extra $300 to $500. However, some teachers make hundreds of thousands of dollars extra each year.
12. Coach a school sport
If you love sports and you’re a teacher, coaching a school sport during the summer might be a great match for your skills and interests.
Coaching a school sport is a great option within your own school district, as many schools need help with their sports teams. You can try coaching sports like soccer, basketball, volleyball, and track and field. Additionally, there are opportunities with after-school clubs such as yearbook, chess, choir, and more that can be a teacher’s side hustle.
13. Run a dog bakery
Beginning a dog bakery can be an enjoyable side job for teachers who adore both dogs and baking. By creating treats for dogs such as cupcakes, cookies, cakes, and more, you can earn an additional $500 to $1,000, or even more, each month.
Recommended reading: How I Make $4,000 Per Month Baking Dog Treats (With Zero Baking Experience!).
14. Sell handmade goods on Etsy
Etsy is a popular online marketplace that connects makers and shoppers looking for unique handmade goods. If you’re a teacher with a creative side, this could be a great site for you to showcase and sell your crafts during the summer months.
Some examples of what you can sell on Etsy that are related to school include:
Educational games and activities
Educational materials like lesson planners and printable worksheets
Handcrafted classroom decorations or educational games
Personalized items such as bookmarks, nameplates, or tote bags
But, you don’t have to only sell teaching-related items. You can sell many other things such as furniture, clothing, jewelry, soap, home decor, and more.
15. Work at a restaurant
Many teachers work part-time or full-time at a restaurant during the summer as servers, hosts, bartenders, and kitchen staff.
Working in restaurants can fit teachers well since they have flexible hours that can match your open summer schedule, and you can leave the job easily once school resumes in the fall.
I know many, many people who have done this, and I would say this is one of the top summer jobs for teachers.
16. Proofread
As a teacher, you likely excel at proofreading and can easily catch mistakes. Using these skills, proofreading can be a fantastic side job. By proofreading, you can help authors, website owners, students, and others in their writing while earning extra income.
Even the best writers can overlook errors in grammar, punctuation, and spelling. That’s why having a proofreader can be helpful for nearly everyone.
You can usually set your own hours, which is perfect for the irregular schedules you might have.
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This free 76-minute workshop answers all of the most common questions about how to become a proofreader, and even talks about the 5 signs that proofreading could be a perfect fit for you.
17. House sit
House sitting is a good option for teachers looking to make extra income during the summer months because a lot of people take vacations in the summer. As a house sitter, you are typically responsible for maintaining someone’s home while they are away. This can include watering plants, collecting mail, and making sure the house remains secure.
People hire house sitters to make sure their homes aren’t left empty, as a visible presence can discourage potential thefts.
To begin house sitting, you can join house-sitting websites to find gigs in your area or ask for referrals from friends and family. Starting with people you know for house-sitting and then using their references can expand your job search.
18. Blog
Blogging can be an enjoyable way for you, as a teacher, to earn extra money from home. Many teachers run blogs, and it makes sense – you can blog when you have free time, without sticking to a strict schedule.
To start your blog, first, pick a topic you’re passionate about, maybe something related to your teaching field or a hobby you enjoy. There are plenty of different niche ideas such as personal finance, travel, food, home, pets, and so much more.
You can earn money as a blogger through ways like:
Affiliate marketing – Share links to products or services related to your blog topic and earn a commission for sales made through your referral links.
Advertising – Add display ads or sponsored posts on your blog.
Courses and ebooks – Create courses or ebooks in your expertise area and sell them through your blog.
Learn more at How To Start A Blog FREE Course.
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Want to see how I built a $5,000,000 blog?
In this free course, I show you how to create a blog, from the technical side to earning your first income and attracting readers.
19. Freelance writing
If you’re looking for remote summer jobs for teachers, then becoming a freelance writer can be a great option.
Freelance writers create content for blogs, websites, magazines, newspapers, advertising companies, and more. You can find writing jobs on platforms like Upwork and Fiverr. Also, you can find clients independently by reaching out to websites you are interested in writing for.
I have been a freelance writer for years, and it all started as a side hustle. This is a great side hustle because you can choose to work as much or as little as you want, such as if you are only looking to do freelance writing in the summer months when you are not teaching at a school.
Recommended reading: 14 Places To Find Beginner Freelance Writing Jobs
20. Transcribe
An online transcriptionist’s role involves listening to video or audio files and typing out the content they hear. Various types of transcriptionists exist, including legal, general, and medical transcriptionists.
This job demands solid typing and listening skills, and the flexibility to work from home on your schedule. Transcriptionists typically earn an average of $15 to $30 per hour.
This is another great side hustle because you can choose to work as much or as little as you want, such as if you are only looking to make extra money during the summer months.
I recommend signing up for FREE Workshop: Is a Career in Transcription Right for You? You’ll learn how to get started as a transcriptionist, how you can find transcription work, and more.
Recommended reading: 18 Best Beginner Online Transcription Jobs To Make $2,000 Monthly
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In this free training, you will learn what transcription is, why it’s a highly in-demand skill, who hires transcriptionists, how to become a transcriptionist, and more.
21. Rent out an unused room in your home
If you have a spare room in your house, you might want to try renting it out over the summer. Platforms such as Airbnb or Vrbo make it easy for you.
I have rented out rooms to others in the past, and it has been a great way to make extra money. If you live in a touristy area, this could even be a gig that you only do in the summers and earn enough to cover your bills or at least pay for some of them.
22. Rent your garage space
If you have available storage space like a garage, driveway, closet, basement, or attic, you might consider renting it out to make extra money. This can be a profitable side hustle without requiring much of your spare time.
Neighbor is a platform where you can list your extra space for rent and potentially earn up to $15,000 per year.
This is a gig that may take up more than just your summer because typically people may store their stuff more long-term. But, you may find some people who only need to store things a few months at a time or perhaps you can also try to turn this into a year-round side hustle.
Recommended reading: Neighbor Review: Make Money Renting Your Storage Space
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You can use this website to list your unused space for rent and make up to $15,000 per year by doing so. With Neighbor, you can rent out your garage, driveway, basement, parking lot, shed, warehouse, carport, attic, street parking, or even a closet.
23. Teach English as a second language
If you’re a teacher looking for a seasonal opportunity, teaching English as a second language (ESL) during the summer can be a rewarding experience.
Many institutions are looking to hire for ESL teaching jobs, ranging from local schools to international language camps and online platforms. Here’s how you can get started and what you might expect:
Typically, ESL teachers need a bachelor’s degree and a teaching credential like TEFL (teaching English as a foreign language) certification. Some positions abroad might have additional requirements.
24. Answer online surveys
If you’re looking for a flexible way to earn extra cash during the summer, answering online surveys could be a great fit. Companies are always in search of genuine feedback to improve their products or services, and your opinions are valuable.
Now, this won’t be a full-time job, but you share your thoughts and can make extra money or free gift cards on your own schedule.
The survey companies I recommend are:
Swagbucks
User Interviews – These are the highest paying surveys with the average being around $60 for an hour of your time.
Branded Surveys
American Consumer Opinion
Pinecone Research
PrizeRebel
InboxDollars
Recommended reading: 18 Best Paid Survey Sites To Make $100+ Per Month
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User Interviews pays very well for market research studies and these are some of the highest paying online surveys, with each paying $50 to $100 or more. The average pays over $60.
25. Mystery shop
Companies hire mystery shoppers to gain insights into their customers’ experiences. They seek genuine opinions on products, feedback on customer treatment, evaluations of phone call interactions, and more. Mystery shoppers play a key role in providing valuable feedback to companies.
This is a great summer side hustle for teachers because you can simply pick up mystery shopping jobs when you need them. So, it’s completely okay and normal to only accept jobs during the summer.
Here’s what mystery shoppers do:
Visit businesses anonymously.
Complete specific tasks, such as purchasing a product or asking questions.
Record your observations.
Provide a detailed report on your experience.
I have done many secret shopping jobs over the years, and I often got mystery shops that provided me with $100 to cover a free dinner.
Recommended reading: How To Become A Mystery Shopper
26. Find gigs on Craigslist
Craigslist can be a goldmine for finding great summer jobs for teachers. It’s a site where individuals and businesses post quick jobs to make extra money.
You can find these gigs by going to the Craigslist website for your city or area. Right on the home page, you’ll spot a section labeled “Gigs.” This is where short-term job offers are posted, ranging from labor-intensive tasks to more skill-specific roles.
Here are some jobs I have found in the past on Craigslist:
Moving boxes to a new house
Deep cleaning a home
Putting together new furniture out of a box
Taking down a shed in a backyard
Handyman
Movie extra
Event parking help
27. Deliver groceries with Instacart
If you’re a teacher looking for flexible summer jobs for teachers, try delivering groceries with Instacart.
Grocery delivery services, like Instacart, are in demand as more people prefer having someone else do their grocery shopping.
Becoming a personal grocery shopper with services like Instacart can earn you an average of $15 to $20 per hour for delivering groceries. You’re paid per order, and you get to keep 100% of your tips. The flexibility allows teachers to choose their schedules, working in the evenings, on weekends, or even exclusively during the summer.
Recommended reading: Instacart Shopper Review: How much do Instacart Shoppers earn?
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Instacart is a popular website for people looking to earn extra money shopping for and delivering groceries. Instacart gives you the option to turn your free time into a chance to make some extra money.
28. Real estate agent
If you’re a teacher looking for a productive way to spend your summer months, you may consider becoming a real estate agent.
Some teachers work as real estate agents alongside their full-time teaching jobs. This is possible because you can list and sell homes during weekends, breaks, evenings, and over the summer.
However, selling homes may have some challenges, as clients may occasionally require your full attention during the day, and you might be occupied with teaching. This is something to consider before getting into real estate as a side job.
29. Virtual assistant
If you’re a teacher looking for a flexible summer job that pays well, becoming a virtual assistant (VA) could be a perfect fit. As a VA, you can use your organizational skills and attention to detail to help businesses and entrepreneurs from the comfort of your home.
Some examples of what a VA does include:
Email management – Keep inboxes organized and respond to emails on behalf of your clients.
Scheduling – Manage calendars, arrange meetings, and send reminders.
File organization – Keep digital files in order using online tools like Google Drive or Dropbox.
Recommended reading: Best Ways To Find Virtual Assistant Jobs
30. Drive for Uber or Lyft
Driving for Uber or Lyft can give you a flexible way to earn money during your summer break.
You get to set your own hours and work as much or as little as you desire, meaning you can align this job with your summer plans.
31. Library assistant
As a teacher, your skills are a natural fit for a summer position as a library assistant. Libraries often seek additional staff during the summer months, providing a great opportunity for you to engage in a role that supports literacy and learning in a calm environment.
Your job may include doing things such as:
Organizing books – Keeping the library orderly and materials easy to access
Circulation desk duties – Checking books in and out for people
Helping library users – Helping visitors find books and resources, and answering inquiries
You can simply contact libraries near you to see if they are hiring.
32. Driver’s ed teacher
Teaching driving lessons to teenagers and adults is a popular side hustle for teachers. If you’re interested, you can check if the high school near you needs a teacher for this subject. Alternatively, reach out to a local driving school to inquire about potential teaching opportunities.
Driving instructors make around $20 an hour more or less, depending on where you live.
Back when I was in high school, I actually took my driver’s ed course at my high school in the summer. It was an easy summer credit, and I also got a discount on my car insurance. One of the teachers taught this course and it seemed fairly easy (other than having to deal with a bunch of us high school students over the summer who were wanting to learn how to drive, ha!).
33. Babysitting
Babysitting can be a side job for teachers, and depending on your location, you might earn around $15 to $25 per hour. Parents tend to prefer hiring teachers as babysitters due to their extensive experience with children.
Becoming a babysitter can be a great way to make extra money in the summer as well, as you can choose to sign up for babysitting jobs that are only during this time.
Plus, many families need extra help during the summer because school is not in session, but the parents still have to work. That is where you come in!
Another job similar to this would be elderly companion care.
Frequently Asked Questions
Below are answers to common questions about finding summer jobs for teachers.
Do teachers still make money during the summer?
Yes, many teachers do receive income during the summer, especially if their annual salary is distributed over 12 months. However, if you’re paid only for the months you work, looking for summer employment can supplement your income during this period. Not all teachers have summer gigs, but those who want to make income in addition to their teacher salaries may try to find something in the summer.
What is the best summer job for a teacher?
The best summer job for a teacher often capitalizes on their skill set. Positions like tutoring, educational program coordination, or teaching summer school are highly relevant options. Teachers might also consider roles in curriculum development or educational content creation.
What jobs exist for substitute teachers looking for summer employment?
Substitute teachers can find summer jobs in other educational roles, such as tutoring, mentoring, or working in summer camps. Many community centers and educational institutions also look for qualified professionals to lead summer workshops or help with childcare programs.
What are some summer jobs for teachers from home?
Teachers looking for summer jobs from home can find opportunities such as online tutoring or virtual summer school teaching. Other side gig ideas include writing content for websites, blogging, transcribing, and more.
Best Summer Jobs for Teachers – Summary
I hope you enjoyed this article on the best summer jobs for teachers.
As you can see, there are many ways to make extra money over your summer vacation.
Teachers have lots of options during the summer. They can stick with education by teaching summer school or tutoring. Or, they can try something new like being a camp counselor or giving local tours.
Teachers who like trying out new things might sell educational printables, sell things for profit, or sell services like pet care or freelance writing.
What do you think are the best jobs for teachers in the summer?
Inside: Embark on a profitable journey with our guide on starting a bookkeeping business. Find the steps on how to become a bookkeeper and find success.
Starting a bookkeeping business from scratch can be an exciting yet nerve-wracking venture.
For many budding entrepreneurs, the formidable task of setting up a business adds a mix of anxiety and anticipation. The initial trepidation often stems from dealing with the unknowns of a new venture and the pressure of ensuring meticulous financial management of someone else’s finances.
However, with thorough planning and an understanding of the essential steps, such as crafting a solid business plan and obtaining the necessary certifications, these nerves can be managed.
By embracing your entrepreneurial spirit and equipping yourself with the right knowledge, you can lay a strong foundation for a successful bookkeeping business.
Plus it is easier to get started than you thought…
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
What is a bookkeeping business?
At its core, a bookkeeping business manages the financial records of other businesses. They ensure accuracy, track receipts and expenses, and prepare financial statements – the financial bedrock upon which enterprises stand.
With an emphasis on accuracy and organization, they are responsible for keeping the financial data up to date and available for strategic decisions.
For many, this is a popular way to make money online.
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First Steps to Starting a Bookkeeping Business
Craft a Comprehensive Business Plan for Success
Your roadmap to success begins with a business plan. This document is crucial—it outlines your vision, goals, unique value proposition, target market, competitive landscape, marketing strategies, and detailed financial forecasts. Think of it as your strategic compass guiding you from startup to growth.
This takes your side hustle to an actual living thriving business.
Remember, your business plan is a living document. You must regularly review and update your business plan will help you stay on track toward your business objectives and adjust course as necessary to meet new challenges or opportunities.
Acquire Essential Certifications and Training
By obtaining the right certifications and training, you not only perfect your craft but also send a message of reliability and professionalism to prospective clients. While this may require an investment of time and resources, the credibility and expertise you gain are invaluable assets for your bookkeeping business.
Select bookkeeping courses that cover crucial topics such as accounting principles, financial statements, tax preparation, and accounting software. This education will deepen your understanding and sharpen your skills.
Stay updated with continuing professional education (CPE) credits to keep your certifications active and your knowledge fresh.
Familiarize yourself with popular bookkeeping software that you’ll use day-to-day. Being proficient in these tools will increase your efficiency and accuracy—qualities clients highly value.
Once certified, don’t forget to prominently display your credentials on your website and marketing materials. This can significantly bolster potential clients’ trust in your abilities and help establish your reputation as a qualified bookkeeping professional.
Bookkeepers.com Online Courses
Learn what you need to start your very own virtual bookkeeping business.
An overview of the bookkeeping business so you can see if it is right for you.
The tools you need to “wow” clients and get paid for your services and
How to create a steady stream of new clients without the need to “sell” yourself.
Learn More
Legal Considerations and Compliance
Setting the legal foundation for your bookkeeping business is not just a formality—it’s about protecting your operations and establishing credibility.
Register Your Business and Secure the Necessary Permits
Let’s look at the essential steps to ensure your business is registered correctly and fully compliant with regulatory requirements.
Choose a Business Structure: Decide whether an LLC, sole proprietorship, partnership, or corporation best suits your needs.
Register Your Business Name: This is a crucial branding element. Check for name availability and register it with the appropriate state agency, ensuring it’s unique and resonates with your target market.
Obtain an EIN: If you’re in the U.S., you’ll need an Employer Identification Number (EIN) for tax purposes, especially if you plan to hire employees. This number is also often required to open a business bank account and apply for business licenses.
Apply for Licenses and Permits: Depending on your location and the structure of your business, you may need various licenses and permits. Check local and state regulations to ensure you meet all legal requirements.
Register for State Taxes: If applicable, register for your state’s tax structure. This may include sales tax, unemployment insurance tax, and other business-related taxes.
Comply with Local Regulations: Ensure you’re familiar with local zoning laws if operating from home, and obtain a Certificate of Occupancy if required. If you’re part of a homeowners’ association, review any stipulations they might have on home-based businesses.
Understand Ongoing Compliance: Be aware of annual filings, renewals for licenses and permits, and other regulatory commitments to maintain compliance.
By being diligent with these legal prerequisites, you’re not just following the rules—you’re also sending a clear message about your professionalism and attention to detail.
Protect Your Endeavors with the Right Insurance
Insurance is the safety net that can save your bookkeeping business from unexpected financial challenges. It’s not about expecting the worst; it’s about being prepared for any situation that could undermine the stability and reputation of your business.
General Liability Insurance: This covers a broad range of issues, including bodily injury or property damage claims made by others.
Cyber Liability Insurance: As a bookkeeper dealing with sensitive data, you’ll want protection against cyber threats and data breaches.
Property Insurance: If you have a physical office or own valuable equipment, property insurance can cover losses from events like fire or theft.
By integrating the right insurance policies into your business strategy, you set up a protective fortress around the hard work and dedication you put into your bookkeeping business. Insurance should not be perceived as an unnecessary expense but rather as a prudent investment in your business’s longevity and reputation.
Setting Up Shop
Establishing a Home Office vs. Renting Space
Choosing the right environment for your bookkeeping business is a balancing act between professionalism, cost-effectiveness, and personal working style. Whether you decide on a home office or opt for a rented space, the decision will significantly impact your operations.
Home Office Advantages
Renting Space Advantages
Cost Savings: Eliminate commuting costs and monthly rent, channeling those savings back into your business.
Professionalism: A commercial office can provide a more professional setting for client meetings and create a clear boundary between work and home life.
Convenience: Enjoy the flexibility of setting your own hours and working in a stress-free environment.
Networking Opportunities: Proximity to other businesses in shared office spaces can foster relationships and potential client referrals.
Tax Deductions: You may be eligible for home office tax deductions, saving you money during tax season.
Amenities: Rented spaces often come with value-added services like receptionists or conference rooms.
Home Office Disadvantages
Renting Space Disadvantages
Distractions: Domestic life can disrupt your work, impacting productivity.
Overhead Costs: Monthly rent and utility bills will add to your business expenses.
Professional Image: Having a dedicated business address and separate workspace can often project a more professional image to clients.
Long-term Commitments: Leases typically require a long-term commitment that may be risky if your business circumstances change.
Ultimately, the decision depends on the nature of your clientele, your personal work preferences, and your budget. Also, this is great for a stay at home mom to make money.
Many bookkeepers find success starting with a home office and transitioning to rented space as the business expands. Others may find that a small rented office fits their needs right from the onset, or that a virtual office setup provides the perfect middle ground.
Selecting State-of-the-Art Bookkeeping Software
With the right bookkeeping software, you can streamline your operations, foster transparency with clients, and confidently tackle complex financial scenarios.
Adopting top-notch software will serve as both a foundation and a catalyst for your bookkeeping business, ensuring you remain competitive and responsive in a rapidly evolving industry.
Look into popular bookkeeping software such as QuickBooks Online, Xero, FreshBooks, and MYOB. Compare them based on features, ease of use, scalability, and customer support.
By taking the time to carefully weigh these factors, you will be better positioned to select bookkeeping software that not only meets your current needs but also supports your business as it expands.
Financial Foundations for Your Firm
Unravel Funding Options and Small Business Loans
Before seeking funding, calculate your startup costs including equipment, software subscriptions, legal fees, marketing, and initial operating expenses. This will help you understand how much capital you need to secure.
Typically, you should be able to start your bookkeeping business with little investment and add additional expenses as you grow.
If needed, there are a variety of funding sources available for new businesses. Research options like traditional bank loans, credit unions, Small Business Administration (SBA) loans, online lenders, and crowdfunding. When applying for loans or pitching to investors, a comprehensive business plan is essential. It should outline your business concept, financial projections, and growth strategy to demonstrate the viability and potential profitability of your bookkeeping business.
Smart Money Management from the Start
Establishing smart money management practices from the very inception is the same as being financially sound with your personal finances.
Open a Dedicated Business Bank Account: Keep your personal and business finances separate. This is fundamental for accurate bookkeeping and simplifies your tax situation come year-end.
Start With a Budget: Even before your first client, create a realistic budget for your business. Know the costs of all aspects, including marketing, equipment, insurance, and any other operational expenses. This will help prevent overspending and ensure your resources are allocated effectively.
Use the Profit First Formula: This simple formula will help you to pay yourself as well as have enough money for operational expenses and to pay your self-employment taxes.
By establishing and maintaining these smart money management practices from the outset, you’re not just safeguarding your bookkeeping business against common financial pitfalls—you’re also building a foundation for a prosperous financial future.
Marketing Your Bookkeeper Business
Digital Presence: Creating a Website That Converts
In today’s digital-first world, your website often makes the first impression for your bookkeeping business. It’s not just an online brochure; it’s a crucial tool engineered to turn visitors into leads and leads into loyal clients.
User-Friendly Design: Your website should be easy to navigate with a clean layout that directs visitors naturally from one section to the next. Prioritize quick load times and mobile responsiveness with Kadence to cater to all potential clients.
Clear Value Proposition: Immediately communicate what you offer and why a potential client should choose your bookkeeping services. Highlight your unique selling points front and center on the homepage.
Strong Call-to-Actions (CTAs): Use compelling CTAs to guide visitors towards taking action, whether that’s contacting you, scheduling a consultation, or signing up for your newsletter. Make it easy for them to engage with you.
Client Testimonials and Case Studies: Social proof can be incredibly persuasive. Showcase positive reviews, client testimonials, and case studies to build trust and credibility with prospective clients.
With a well-crafted website, your bookkeeping business demonstrates its expertise and readiness to cater to client needs, no matter where they are in their financial journey.
Networking and Navigating Social Media Strategies
Building a robust network and mastering social media can turbocharge your bookkeeping business’s growth. It positions you not just as a service provider, but as a thought leader in your field.
Identify the Right Platforms: Choose one or two social media platforms where your target audience is most active. LinkedIn, for instance, is a goldmine for professional networking, while Instagram can showcase your brand’s personality.
Create Valuable Content: Share content that resonates with your audience — tips to manage business finances, tax updates, or insights into bookkeeping trends. This positions you as an expert and invites engagement.
Engage Actively: Don’t just post and disappear; interact with your followers. Answer questions, join discussions, and show appreciation for their engagement. Building relationships is key to networking success.
Leverage Professional Groups and Forums: Beyond your own social channels, be active in online groups or forums related to bookkeeping and your clients’ industries to expand your visibility and establish credibility.
Your network and social media are not just channels for promoting your services; they’re platforms for sharing your expertise, engaging with peers and potential clients, and building a community around your bookkeeping brand.
Bookkeeping Startup Pricing, Clients, and Growth
Determining Competitive Rates for Your Services
Setting competitive, yet fair pricing for your bookkeeping services is a balancing act that ensures value for your clients and viability for your business.
Let’s explore how to establish a rate structure that meets the market demands and supports your financial goals.
Market Research: Begin by understanding what other bookkeepers in your area or within your niche are charging. This insight will help you benchmark your rates competitively. Keep in mind factors like experience, specialization, and location.
Value Your Expertise: Assess your qualifications, experience, and the quality of services you offer. Clients are willing to pay for the value you bring to their business, so price your services accordingly.
Consider Your Costs: Ensure your rates cover your expenses, including software subscriptions, continuing education, insurance, and taxes, while also leaving room for profit.
Pricing Models: Decide whether you’ll charge hourly, offer flat-fee packages, or adopt a value-based pricing model. Each model has its advantages and can be chosen based on the type of service or client preferences.
Communicate Your Pricing Clearly: Be transparent with clients about your rates. Clear communication prevents misunderstandings and builds trust from the outset. [Placeholder for sample pricing page]
Within your pricing strategy, consider the lifetime value of client relationships and the potential for added services down the line.
How will you find clients for your bookkeeping business?
Finding clients is the engine that powers your bookkeeping business and your income. With a strategic combination of diligent networking, tactical marketing, and leveraging existing relationships, you can start building your client base.
Utilize Online Platforms: Websites like Upwork, Fiverr, and LinkedIn can connect you with businesses looking for bookkeeping services.
Local Business Outreach: Approach local businesses directly. Offer to discuss how your bookkeeping services can alleviate their financial stress and add value to their operations.
Referral Program: Encourage word-of-mouth by setting up a referral program. Incentivize your current clients or network to refer others to you.
Social Media and Content Marketing: Create and share engaging content on your social media profiles to build brand awareness.
Community Involvement: Join local business associations, attend chamber of commerce events, or contribute to community projects. These can lead to connections and opportunities.
Offer Free Workshops or Webinars: By providing value upfront through informative sessions on bookkeeping and financial management, you can attract potential clients who are interested in improving their business finances. Also, you can partner with other professionals.
Professional Partnerships: Build relationships with accountants, lawyers, and business consultants who might not offer bookkeeping services but can refer their clients to you.
With a consistent and strategic approach, you can attract and retain the clients that are the best fit for your business, ultimately building a robust client portfolio. Remember, it’s not just about finding any clients—it’s about finding the right clients who treasure you.
Discovering and Retaining Your Ideal Clientele
Attracting clients is one feat, but discovering and retaining those who are the perfect fit for your bookkeeping business is where the real growth happens.
Offer Customized Solutions: Set yourself apart by tailoring your services to meet the specific needs of your clients. Show that you understand their industry and are invested in their success.
Provide Exceptional Service: Consistently deliver high-quality work, be responsive, and proactively address your clients’ needs. Clients will stay with a bookkeeper who goes above and beyond.
Host Client Appreciation Events: Small gestures of appreciation or exclusive events can strengthen business relationships and foster client loyalty.
Stay on Top of Industry Trends: Being knowledgeable about your clients’ industries can make you indispensable. Offer insights that can help them stay ahead of the curve.
Stay Ahead in the Bookkeeping Scene
Continuous Learning and Leveraging Industry Trends
The bookkeeping industry doesn’t stand still, and neither should you. Continuous learning keeps you at the forefront of evolving practices, ensuring your services remain relevant and your advice sound.
Keep Abreast of Regulatory Changes: Tax laws, financial regulations, and compliance standards can affect your clients; stay updated through webinars, online courses, and industry news.
Embrace Technological Innovations: New software and tools can streamline bookkeeping tasks. Be open to adopting tech that can improve your efficiency and the services you provide.
Participate in Professional Development: Attend workshops, seminars, and conferences geared toward bookkeeping professionals. Networking with peers can also uncover new trends and techniques.
By maintaining a commitment to continuous learning, you not only improve your own skillset but also enhance the overall value of your bookkeeping services.
Join Professional Associations for Peer Support
Being part of a professional association offers more than just credentials; it’s a direct line to a community of peers who can share insights, resources, and support as you build and grow your bookkeeping business.
By joining professional associations such as the American Institute of Professional Bookkeepers (AIPB) or the National Association of Certified Public Bookkeepers (NACPB), you demonstrate a commitment to professionalism and continuous improvement. These affiliations provide a wealth of resources to support you in delivering high-quality services and growing a thriving bookkeeping business.
Plus you can take advantage of seminars, webinars, and certification courses offered by associations to further your education and maintain any required continuing education credits.
Bookkeepers.com Online Courses
Learn what you need to start your very own virtual bookkeeping business.
An overview of the bookkeeping business so you can see if it is right for you.
The tools you need to “wow” clients and get paid for your services and
How to create a steady stream of new clients without the need to “sell” yourself.
Frequently Asked Questions (FAQs)
Yes, a bookkeeping business can certainly be profitable. It offers a low overhead cost model, recurring revenue opportunities through ongoing client relationships, and the potential to scale services.
With diligent financial management and strategic growth, profitability can be substantial.
While a degree is beneficial for deep knowledge, it’s not mandatory. Certification and practical experience can often suffice in starting a successful bookkeeping business.
In fact, this is one of the best low stress jobs without a degree.
Begin by gaining an understanding of bookkeeping principles, getting certified, investing in software, and slowly building up your clientele with strategic marketing and networking.
Ready to Open Bookkeeping Business?
Starting your own bookkeeping business can be a fruitful endeavor with the right preparation and education.
This guide outlines the key steps and provides direction on how to start a bookkeeping business, ensuring you cover all essential elements for a successful launch. With focus and attention to these structured steps, you’ll be well on your way to establishing a thriving bookkeeping business.
Still on the fence? Check out this free bookkeeping webinar to learn more.
With the right preparation, tools, and mindset, you can launch a thriving venture that supports businesses in their financial journey while growing your own entrepreneurial dreams.
Embrace the adventure—your future in finance awaits!
Just remember if you are looking for ways to make money fast, this one comes with patience and perseverance to make things happen.
Earn Extra Income with Bookkeeping
Bookkeeping is the most stable, reliable & simple business to own. This is how to make a realistic income -either part-time or full-time.
Find out TODAY if this is THE business you’ve been looking for.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Do you want to learn how to get paid to work out? If you have a passion for working out and want to turn fitness into a way to get paid, then you are in luck. There are many ways to get paid to work out, and today we will be talking about 19 ways…
Do you want to learn how to get paid to work out?
If you have a passion for working out and want to turn fitness into a way to get paid, then you are in luck. There are many ways to get paid to work out, and today we will be talking about 19 ways to make extra money while exercising.
In today’s post, you’ll learn:
Ways to turn exercise into cash
How to make money running
Apps that pay you to walk
How you can get paid to lift weights
19 Ways To Get Paid To Workout
Below are the best ways to get paid to work out. From popular money-making apps to full-time jobs, there are many people and companies that pay you to work out.
1. Sweatcoin
Sweatcoin is a free app that pays people to walk.
The app rewards daily steps with Sweatcoin currency (coins) that lets you spend the credits on gift cards (such as to Amazon or Starbucks), iPhones, Apple Watches, donate it to charity, and more. Other rewards include a free subscription to meditation apps, a free Scribd trial, wireless headphones, massage memberships, discounts on Barkbox, coffee subscriptions, gym memberships, and more.
This is one of the most popular apps in the world ever, with over 120,000,000 registered members.
2. Stepbet
Stepbet is another popular fitness app that pays you for walking. You can connect your fitness tracker (such as your Apple Watch, Fitbit, Samsung Health, or Google Fit) to the app and even set weekly step goals to keep you motivated.
The app works like this: You select a game to get your step goals, then bet into the pot to join. If you meet your weekly step goal, you can split the pot and get your bet back plus make a profit.
This app makes it easy to stay motivated to walk because you have a financial stake in it as well. This is a great way to get paid to work out from home.
3. Healthywage
Healthywage is one of the most popular fitness apps that pays you to lose weight. Once you’re on the site, you enter how much weight you want to lose. You also enter how long you’ll have to complete the weight loss goal and how much money you want to bet per month.
For example, if I wanted to lose 30 pounds in under 9 months and bet $60 of my own money, my prize range is between $588-$1,116.
There are weekly weigh-ins and support from other contestants to help you get closer to your weight loss goal. If you complete the weight loss goal, you win the prize.
The purpose of HealthyWage is to motivate you to lose weight and make it more motivating and engaging by using a financial incentive.
4. DietBet
DietBet is a platform with the concept of social networking with weight loss goals. DietBet functions essentially as a dieting game where contestants can bet money on the ability to meet their weight loss goals within a certain time frame. Winners get to keep the cash reward.
To get started with DietBet, you join a game that is basically a body weight loss challenge. You place a monetary bet into a communal pot. Whoever wins the pot (and achieves their weight loss goal) gets the divided winnings at the end of the challenge.
To make sure that everyone is playing fairly, you have to submit verifiable weigh-ins at the beginning and end of each challenge via photos or videos.
5. Fit For Bucks
Fit For Bucks is a workout app that pays people to walk, dance, run, and stay active. To get started, download the Fit For Bucks app and connect your activity tracker or Apple Watch. Then you can get moving and start earning rewards for your daily movement.
Rewards include things like free coffee, money towards fitness studios, free haircuts, and more. The goal of this app is to get people active and motivated to move more.
6. Waybetter
Waybetter makes losing weight fun by challenging you with fitness-related games. This app turns what could be described as boring into something that makes healthy habits sustainable and fun to help you on your weight loss journey.
The app works by making games that create micro goals and gives you accountability and support from other like-minded people. Games on Waybetter include things like walking at least 8,000 steps a day, drinking a certain amount of water, decluttering your home, reading books, flexibility challenges, increasing your plank time, and many more.
7. Charity Miles
Charity Miles is a little different than the other apps mentioned in that it doesn’t reward you personally. Instead, your rewards go to the charity of your choice.
To get started, download the Charity Miles app. The app connects with your phone’s Apple Health app and automatically pulls the steps from there. Any fitness devices linked to your Health app will sync to the app. The app turns all of your miles you walk, run, and bike into money for charity.
You can track all kinds of activities for Charity Miles including walks, runs, bike rides, shopping, golfing, dancing, and anything step-related.
8. Rover
One of my favorite ways to make extra money is walking dogs on Rover. Rover is an app that connects dog walkers with dog owners. I have been a Rover dog walker and absolutely loved it. I have been paid for walking dogs (which gave me exercise for the day) and spending time with really cute pets.
To get started on Rover, make a profile and list what services you offer. If you have previous experience dog walking, this is a major plus and will make you stand out from other dog walkers.
If you don’t have previous experience walking dogs, set your rates lower than other people on the app. This will make your rates competitive and you’ll get chosen quicker. These people will leave you reviews (and hopefully good ones, granted your services are great). The more 5-star reviews you have, the more you’ll stand out.
Recommended reading: 7 Best Dog Walking Apps To Make Extra Money
9. Evidation
Evidation is an app that rewards people for doing things like walking, sleeping, biking, and more. To get started, download the app and connect your Apple Health, Fitbit, Garmin, or Oura app. This will sync your daily steps, which will give you points you can redeem in the app.
You can also earn points in the app by participating in surveys that ask questions about your health. For every 10,000 points you earn, Evidation will pay you $10 which you can redeem via PayPal cash and other cash prizes.
10. MapMyFitness
MapMyFitness is an app that tracks workouts including running, cycling, and other physical activities. While you won’t get paid with MapMyFitness, you can enter challenges and win monthly prizes.
Some employers or organizations will use MapMyFitness to stay active by participating in fitness challenges. These challenges backed by employers may even have rewards.
11. Walgreens Balance Rewards
Walgreens Balance Rewards is a program that gives you redemption dollars at Walgreens for doing things like walking and other fitness activities. With the Rewards program, you can link your fitness trackers which will sync your steps in the app.
You can also earn points for doing things like tracking your blood pressure, sleep, and weight.
12. Guided walking tours
If you have a lot of knowledge of your local town or a historical place, you may want to sell guided walking tours.
To get started, find a historical or touristy spot that would work well with a guided walking tour. Create your walking itinerary and highlight key points of interest and historical facts.
Start small and gradually work your way up to offering larger walking tours. This is a great way to combine your love of fitness with your love of a local spot that tourists love to visit.
Recommended reading: How to Make Money as an Airbnb Experience Host
13. Ski instructor
If you love skiing and enjoy teaching others how to do this sport, you may want to try becoming a ski instructor. This way you can combine your love for the sport and teach others how to ski as well.
To become a ski instructor, you likely need to obtain a recognized ski instructor certification. This will make you more marketable and even allow you to teach more advanced lessons.
Ski resorts are pretty much always hiring ski instructors, and you don’t need to be an expert or an Olympic skier to become a ski instructor either. This is something that you can learn to do.
14. Rock climbing guide
If you like to rock climb, then you may be able to become a rock climbing guide. Earning money doing this requires a combination of skills, certifications, marketing, and networking with other people who also work as guides.
To get started, it’s important to obtain certifications offered by the American Mountain Guides Association. This will increase your credibility and give you more job opportunities.
You may even want to connect with local and online climbing groups to market your business and get the word out that you’re a rock climbing guide. Put up flyers in your local rock climbing gym and make it easy to get in touch with you about your services.
15. Fishing guide
Making money as a fishing guide requires a certain set of skills, certifications, and licenses. It’s also important you have extensive knowledge of the best local fishing spots, seasons, and regulations.
Working as a fishing guide takes a lot of physical activity since you’re doing a lot of walking, wading in water, and (obviously) fishing.
Many places are in constant need of fishing guides, such as lodges and guide companies in Florida and Alaska.
So, you can easily network with local businesses such as bait shops, fishing gear retailers, and local hotels. The more people that know about your services as a fishing guide, the better.
16. Fitness trainer
One obvious way to get paid to workout is to work as a fitness trainer. Working as a fitness trainer involves a combination of skills, marketing yourself effectively, and providing top-notch service to your clients.
To get started as a fitness trainer, it’s important to obtain a reputable certification from organizations like NASM, ACE, or ACSM. Once certified, you can teach others how to workout in person at local gyms or offer virtual training.
You could even sell workout plans as a personal trainer, such as on a social media platform. I have seen many fitness influencers do this over the years.
17. Landscaper
Landscaping is a physically demanding job, but if you love it, you can turn it into a way to make extra money. As a landscaper, you can offer all kinds of services such as lawn maintenance, garden design, and tree and shrub care.
You’ll want to make sure that you take photos of your work and gather a portfolio so future clients can see the incredible work you can do. Word of mouth plays a big role in the landscaping business, so it’s important to give the best service to your clients.
18. Yoga instructor
If you love yoga and want to make money teaching others how to practice, then become a yoga instructor. To get started, you need to obtain a teacher certification from a reputable organization. Reach out to local yoga studios and figure out where people are getting certified in town.
Once you get certified, you can even specialize in a certain niche such as prenatal yoga, therapeutic yoga, power yoga, Bikram yoga, and more. You can teach group classes, private classes, workshops, and even online classes.
You may even want to try developing an online presence which will attract new people to your yoga classes.
19. Share workouts on Instagram
You can make money as a fitness Instagrammer once you have a strong following. It’s important to share high-quality and visually appealing photos and helpful captions. Share workout routines, fitness tips, and inspirational content to keep your audience engaged.
Once you have a good number of followers, you can make money with sponsored content, affiliate marketing, and even selling your own workout training programs and guides. You can even promote your online coaching services and work with people 1-1.
Another way similar to this is to do something similar on a YouTube channel that you create!
Frequently Asked Questions
Below are answers to common questions about getting paid to work out.
How can I make money if I like working out? How can I make money being physically fit?
There are so many ways to turn your love of working out into money. This can be done using apps like Sweatcoin or running a business such as personal training or dog walking.
Can you get paid to run? What app pays you to run?
If you enjoy running, make some extra money or get free stuff by using apps that pay you to walk or run. If you want to make a part-time income, then become a dog walker on Rover and take dogs on walks or runs.
What app pays to walk?
Apps like Sweatcoin, Fit For Bucks, and Rover pay people to walk. Sweatcoin and Fit For Bucks pay in rewards within the app, and Rover pays actual money for walking dogs. Some of these apps are available on iOS or Android devices, as well as on your laptop or computer as well.
Other fitness apps that you may have heard of include FitPotato, Runtopia, Step Younger, and Gym-Pact. I have not researched these, though.
Are there gig economy jobs that I can do while working out?
Yes, some gig economy jobs (such as DoorDash) can be done from a bike, which could be a great workout.
Can you get paid to lift weights?
While you’re lifting weights, apps like SweatCoin will count how many steps you’re walking during your workout. Besides that, you can make even more money by lifting weights by:
Competitive weightlifting and get paid via prizes, sponsorships, and endorsement
Fitness modeling
Social media and content creation (sharing your fitness tips with followers)
Offering fitness workshops
Sell weightlifting programs or training guides
Best Ways To Get Paid To Workout – Summary
I hope you enjoyed today’s article on how to get paid to work out.
If you enjoy exercising and fitness, turn that passion into extra cash by getting paid to workout. This list of ways to make extra money pays you to walk, lift weights, run, and do other physical activities that also benefit your well-being.
As you read above, there are many great apps and jobs that will pay you to work out.
What’s your favorite way to get paid for a workout?
Looking for the best fun jobs that pay well? Many people dream of having a job they love that also pays well. I completely get it – you don’t want to hate working a job that you’ll be at 40 hours a week! I’m very grateful to have a job that I love. I don’t…
Looking for the best fun jobs that pay well?
Many people dream of having a job they love that also pays well. I completely get it – you don’t want to hate working a job that you’ll be at 40 hours a week!
I’m very grateful to have a job that I love. I don’t dread any day of the week, and I genuinely love what I do. Due to that, I hope everyone gets to feel the same about their job as well.
Thankfully, it’s easy to find a job that lets you do what you enjoy and still pays you a good paycheck. Whether you love working online or driving fast cars, there are many job options that let you have fun while also making good money.
Whether you want to make extra income or find a full-time job, there are many fun jobs that pay well that may interest you.
Fun Jobs That Pay Well
When you’re looking for a job, it’s great to find one that you find fun and that also pays well. Here are some top choices to start with:
Bloggers work from anywhere and write about topics such as family, recipes, personal finance, travel, and more. This is what I do, and I think it’s a ton of fun. Plus, it pays very well!
Art therapists use creativity to help others. They draw or paint as a way to support people’s emotional health. This job requires a master’s degree, but it combines art with helping people, which can be very rewarding.
A Ferrari driving instructor teaches others how to drive a luxury sports car. It’s not just exciting; it can also pay between $90,000 and $120,000 a year.
If you like spotting mistakes in content, then finding a proofreading job may be perfect for you. Proofreaders act like an extra set of eyes to read articles, papers, books, ads, and other written content.
Below are over 40 other fun jobs that pay well that I recommend learning more about.
1. Blogger
If you want to find a fun job that pays well, my favorite way is to start a blog. That’s exactly what I do for a living!
A blog is content written on a website. It usually includes articles like what you’re reading here.
You can blog about something you’re passionate about or something you know a lot about. Or even a topic you want to learn more about (people love following others’ firsthand journeys!).
I began Making Sense of Cents in 2011, and since then, my blog has earned me over $5,000,000 over the years.
I started my blog on a whim to share my own money journey. At first, I didn’t even know people could earn money from blogs or how to make a successful one. And now, it’s my full-time job!
There are many ways to make money blogging such as:
Advertising revenue (banner ads that you see in blog posts)
Sponsored blog posts (when a blogger partners with a company to promote a specific item or company)
Affiliate marketing (when a blogger receives income for referring readers to a product)
Selling digital products or services (such as courses, clothing, books, and more)
You can learn how to start a blog with my free How To Start a Blog Course (sign up by clicking here).
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Want to see how I built a $5,000,000 blog?
In this free course, I show you how to create a blog, from the technical side to earning your first income and attracting readers.
2. Printables designer
Making and selling printables can be a fun way to earn money. When you create printables on Etsy, you only need to make one digital file for each product. After that, you can sell it many times to make more money.
Printables are things you can find online and print at home.
These can be things like a planner, coloring pages, wall art prints, greeting cards, gift tags, and so much more.
I buy printables frequently, and so do others all the time. Recently, I bought a printable for my daughter and it was a useful tool to help teach her the alphabet. I love that I can easily search what I’m looking for and get exactly what I want – plus I can print it right at home quickly!
Recommended reading: How I Make Money Selling Printables On Etsy
Do you want to make money selling printables online? This free training will give you great ideas on what you can sell, how to get started, the costs, and how to make sales.
3. Voice actor
A voice-over actor is someone you hear but don’t usually see in things like videos on YouTube, documentaries, radio ads, TV ads, corporate talks, online courses, audiobooks, video games, movies, and cartoons.
Voice actors don’t necessarily need experience for this job (although it can be helpful later on). What’s important is having a voice that matches what the company is searching for.
Recommended reading: How To Become A Voice Over Actor
4. Photographer
As a photographer, you get a special chance to capture moments and tell stories with your camera. Photography has many different areas where you can focus, and they can be both satisfying and financially rewarding.
Here are some examples:
Photojournalist – You document events for media outlets, such as National Geographic.
Wedding Photographer – Your role would be capturing wedding moments in couples’ lives.
Stock photo photographer – Photographers can sell their pictures on stock image sites, which are really popular. These sites let customers purchase pictures for things like websites, TV shows, books, and social media.
Recommended reading: 18 Ways You Can Get Paid To Take Pictures
5. Buy and sell flipper
Being a buy-and-sell flipper means you’re into flipping items for profit.
This includes getting undervalued things from flea markets, garage sales, or online places and then selling them for more money.
This could be things like clothing, electronics, furniture, cars, and so much more. Basically, anything and everything!
Your success depends on how good you are at finding good deals, knowing the values in the market, and selling things again for a profit.
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This free workshop will teach you how to get into the flipping business. It will teach you how to resell furniture, electronics, appliances, and anything else you can find.
6. Proofreader
As a proofreader, your careful attention to detail can become a rewarding career. Proofreading means going through texts to fix grammar, spelling, and punctuation mistakes before they get published. This job is important to make sure written content is clear and doesn’t have errors.
Many people, like authors, website owners, and students often hire proofreaders to make their work better. There’s a big need for proofreaders, and you can find jobs on various platforms.
Even the best writers can make mistakes in grammar, punctuation, and spelling. That’s why getting a proofreader can be really helpful for almost everyone.
In fact, although I have written over 2,000 articles, I have a proofreader who will have proofread this very blog post.
Recommended reading: 20 Best Online Proofreading Jobs For Beginners (Earn $40,000+ A Year)
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This free 76-minute workshop answers all of the most common questions about how to become a proofreader, and even talks about the 5 signs that proofreading could be a perfect fit for you.
7. Freelance writer
Freelance writers create content for clients, like blog posts and advertising. Freelance writing usually involves working independently. Clients give you a topic, you write about it, and then you might receive feedback, like suggestions to improve or add paragraphs.
You can write about any topic that you want to – such as travel, money, home, and so on.
How much you make as a freelance writer depends on your experience and the topics you write about. When you start, you might earn around $50 to $75 for a 500-word article. As you get better, you can charge more. For a 1,000-word article, you could make between $100 and $150. If you do well over time, you can ask for even higher rates.
I was a freelance writer for many years before transitioning to full-time writing here on Making Sense of Cents. It’s a great career where you can mostly work from home on your own.
Recommended reading: 14 Places To Find Freelance Writing Jobs
8. Graphic designer
A graphic designer is someone who makes designs for people and businesses. As a digital designer, you might create images, social media graphics, printables, T-shirt designs, business cards, stickers, logos, and more.
As a graphic designer, your main job is to communicate through visuals. You use a mix of typography, images, color, and layout to convey messages and brand identities. This field gives you the freedom to express your creativity in different ways, whether it’s through digital designs or print materials.
Recommended reading: How To Make Money As A Digital Designer
9. Social media manager
Being a social media manager is an exciting career choice and your main job is to take care of how a company or person appears online on different platforms. Your tasks include interacting with followers, selecting content, and planning social media posts.
Here are the key areas you typically need to focus on:
Content creation – Create fresh, original posts tailored to each platform.
Engagement – Interact with the audience by responding to comments and direct messages.
Strategy planning – Use data analytics to drive social media strategies, aiming for increased engagement and reach.
The salary can vary, and you can choose to do this job either part-time or full-time.
10. Social media influencer
Related to the above, you can make money with your own social media accounts as well.
Have you ever followed someone on Instagram or TikTok and thought to yourself that it would be fun if you could do something similar?
Social media influencers use different online platforms to create, share, and connect with content that their audience likes. Your success depends on growing a big group of followers and establishing yourself as a trusted voice in your specific area.
As an influencer, you’ll create your brand by sharing your interests, pictures, and opinions on social media platforms such as Instagram, TikTok, Facebook, and others.
You can earn money through sponsored posts (when brands pay you to promote their products or services in your Instagram posts), affiliate marketing (earning commissions from sales through your referral links), and by creating digital products like ebooks or online courses.
I’ve been a social media influencer for years, monetizing my Instagram and Facebook accounts. It’s a great experience as I get to collaborate with companies I love and promote products I already use.
11. Veterinarian
If you have a passion for animals, then becoming a veterinarian may be a great fit for you.
Veterinarians have a skilled and fulfilling role dedicated to animal health and welfare. The main responsibility is to provide medical care to animals, diagnose health problems, and perform surgeries.
Vets work in private clinics, animal hospitals, research facilities, zoos, and more.
The veterinarian career path is rewarding as it lets you blend a love for animals with the chance to make a positive impact on their lives.
To become a veterinarian, you must complete a Doctor of Veterinary Medicine (DVM) program and obtain a state license to practice. This usually involves:
A bachelor’s degree
A four-year veterinary program
The national average salary for veterinarians is around $100,000 per year.
12. Marine biologist
One job that I dreamed of as a kid was to become a marine biologist. It always sounded like so much fun to work with water and sea animals.
Marine biologists study marine organisms and how they behave and interact with the environment. Your work might take you from coastal wetlands to the deepest parts of the ocean.
Here are some of the things they do:
Conduct research on marine wildlife and ecosystems
Monitor the health of marine habitats
Develop conservation plans
Educate the public and policymakers
Marine biologists are important for understanding marine life and contributing to ocean conservation efforts.
13. Mystery shopper
Retailers, restaurants, and financial institutions need mystery shoppers for detailed feedback to improve their customer service and products.
This might not be a full-time job, but it can provide you with some extra money each month.
I remember when I first learned about mystery shoppers. I was working at a clothing store, and we would have mystery shoppers come in to see how we were doing. We never knew who the mystery shopper was, but we would get to read their report afterward and see what they thought of us.
After learning about mystery shopping, I found a website where I could become one as well. It sounded like fun to get paid to shop.
I would make about $150 to $200 per month through mystery shopping, and I also got free items and services, like $100 to spend at restaurants (where I had to provide feedback while I was there), makeup, and more.
Recommended reading: How To Become A Mystery Shopper
14. Architect
Architects have a special mix of creativity and technical skills, allowing them to design buildings that are not just attractive but also functional and safe.
Their role includes making detailed plans, and considering factors like sustainability, budget, and client needs.
To become an architect, you typically need a bachelor’s or master’s degree in architecture and you’ll need state licensure, which is obtained by passing the Architect Registration Examination (ARE).
15. Stunt person
A stunt person is a cool job where you use your physical skills to create exciting action scenes for movies, TV, and live shows. It’s a big part of making the action look real and thrilling.
To do this job, you might need lots of training in things like martial arts, gymnastics, or extreme sports. You also have to be good at handling pressure and follow safety rules closely.
16. Professional video gamer
Yes, if you like video games, you may actually be able to make money as a professional video gamer.
While the amount of money you can make will definitely vary, top gamers have the potential to earn from tournament prizes, sponsorships, and streaming content for fans:
Tournaments: Prize pools can be large, reaching into the millions for top-ranking competitions.
Streaming: Platforms like Twitch and YouTube pay through ads, subscriptions, and donations.
Sponsorships: Companies may endorse you and pay you with sponsorships or free items.
You could maybe even find a job working for a video game designer, testing out video games so that companies can improve their video game design.
Recommended reading: How Much Do Twitch Streamers Make?
17. Chocolatier
Many people at some point in their lives want to become the person who makes chocolate and candy – sounds amazing after all, right?
A chocolatier is someone who uses cooking and art skills to make chocolates. It’s a job that needs creativity, precision, and a good sense of taste.
You might work for yourself, making chocolates, or you may even work for a large chocolate company. I know people who do both!
18. Personal trainer
If you want to find a job that you’ll love, becoming a personal trainer may be it.
Personal trainers play an active role by combining fitness with motivational skills to help people reach their health and fitness goals. This job includes:
Assessing clients’ fitness levels and health conditions
Developing personalized workout and nutrition plans
Demonstrating exercises and routines to clients
Tracking clients’ progress and adjusting plans as needed
How much you earn as a personal trainer can change a lot based on where you work, your qualifications, and the clients you get. Personal trainers usually make an average of $40,000 to $70,000 per year.
19. Supercar driving instructor
Supercar driving instructors have an exciting job where they help people learn how to drive fast cars on racetracks.
The role includes teaching safety and giving an exciting experience as well as explaining how to handle the vehicles, follow track rules, and use advanced driving techniques.
You can usually earn a high income doing this, plus you get to drive some of the world’s most exotic supercars.
20. Toy designer
Being a toy designer is probably most children’s dream career. After all, who hasn’t loved toys at one point in their life?
The toy industry is always looking for creative designers to make new toys that will grab kids’ attention and imagination.
Toy designers have a cool job where they mix creativity with making things work well. The main aim is to create toys that are fun and help kids learn and grow. This special job combines artistic skills with knowing about how children think and learn.
21. Restaurant critic
Restaurant critics evaluate dining establishments and share their experiences through written reviews. Their main responsibility is to provide an unbiased review of the food quality, service, ambiance, and overall dining experience.
To gain experience and get started, begin by developing your taste buds and learning about different cuisines. This can involve:
Going to cooking workshops
Exploring different food places when you travel
Creating your own blog or starting an Instagram dedicated to food
22. Brewmaster
If you love craft beers and enjoy understanding how fermentation works, becoming a brewmaster could be a fun and rewarding career.
Brewmasters manage the brewing process, such as creating recipes, choosing ingredients, and making sure the quality is top-notch during production.
To start, you might need formal education, such as a degree in brewing science or a related field. However, some brewmasters climb the ladder from roles like brewing assistants, gaining experience through on-the-job learning.
23. Fashion designer
Fashion designers make clothing, accessories, and shoes, and they draw designs, pick fabrics and patterns, and guide how the products designed should be made.
Fashion designing can be a fulfilling career if you love fashion and enjoy creating. It gives you a chance to express yourself personally and can even lead to getting noticed in the industry.
24. Food stylist
Food stylists combine culinary art with aesthetics, making sure that dishes not only taste good but also look delicious and perfect for photographs.
Their duties include choosing ingredients thoughtfully, preparing the food, and presenting it in a way that’s visually attractive. This is important for different media like advertising, packaging, cookbooks, and film.
25. Event planner
Event planners organize events, from big corporate conferences to small weddings. Their main job is to make sure every part of the event matches the client’s vision, fits the budget, and meets the goals.
According to Glassdoor, the average pay for an event planner is around $50,000 per year. Your salary can change based on things like your experience, where you work, and the size and type of events you handle.
26. Animator
If you’re looking for fun jobs that pay well, then becoming an animator may be it!
Animators make visual creations, and their main focus is on designing characters, environments, and entire worlds in 2D or 3D formats.
Here’s what you may work on:
Character design: Create and develop characters for various media.
Story development: Collaborate on storyboards to plan out visual narratives.
Animation: Work with digital tools to animate drawings and models.
The animation industry values creativity and technical skills and also pays competitive salaries with the opportunity to contribute to exciting storytelling processes. Whether you’re involved in creating animated TV shows, movies, or video games, being an animator can be both enjoyable and financially rewarding.
27. Real estate agent
Real estate agents are professionals who help people buy and sell properties, such as houses and commercial buildings.
I know a few real estate agents, and they all seem to love their jobs. They get to see beautiful new homes and properties and help their clients find their dream property.
Plus, they usually set their own schedule, which can help you create a better work-life balance.
28. Private investigator
Private investigators conduct investigations on various matters, including legal, financial, and personal issues.
This may include doing things like surveilling someone to get information, interviewing people to get details, researching public and legal documents, as well as gathering evidence for cases.
Here are some steps to becoming a private investigator:
Have a high school diploma or equivalent. Perhaps even get a degree or certification in criminal justice or a related field.
Gain experience in a related field such as law enforcement or the military.
Acquire a private investigator license, as required by your state.
29. Romance novelist
Starting a career as a romance novelist can bring both fulfillment and income. If you love storytelling and especially romance, this can be a fun one to think about.
Recommended reading: How to Make Money Self-Publishing Short Romance Novels
30. Interior designer
Interior designers mix creativity with practicality to decorate the insides of properties. Their job is to design and put in place the aesthetic and functional aspects of residential or commercial spaces.
Your job would be to create an environment that looks good and is comfortable for your clients.
31. Airline pilot
Airline pilots have a career that is both exciting and has the potential to make a lot of money. Their main job is to pilot commercial aircraft, flying from one place to another, and making sure everyone on board, including passengers and crew, stays safe.
Some of their daily duties include:
Conduct pre-flight inspections
Navigate the aircraft
Communicate with air traffic control
Monitor weather conditions and aircraft systems
Lead the crew and manage any in-flight issues
32. Drone pilot
Drones have gained popularity lately, not just for recreational use but also for jobs requiring aerial photos and videos. This creates a growing opportunity for individuals to start small businesses and make money with their drones.
Your job as a drone pilot may be to:
Take high-quality images and videos from unique perspectives, such as for real estate, construction, or events.
Perform inspections, surveys, and mapping for various industries like mining or agriculture.
Analyze data and images to give insights to clients.
Recommended reading: How To Make Money With A Drone
33. Sommelier
Sommeliers have a lot of knowledge of wine and can share it in a fun way.
This job is usually found in upscale restaurants, and this role involves suggesting wines that go well with customers’ meals, conducting wine tastings, managing wine service, and taking care of the wine cellar.
34. Chef
Chefs, of course, play an extremely important role in a restaurant kitchen, crafting menus and overlooking meal execution. Their primary responsibilities include tasks like:
Menu Design: They create food menus for a restaurant.
Food Preparation: They oversee and sometimes partake in the detailed preparation of ingredients.
Cooking: They cook the restaurant meals and oversee other cooks in the kitchen.
35. Cruise director
Cruise directors make sure passengers have an unforgettable experience aboard a cruise ship. This job requires a fun personality and excellent skills in managing both entertainment programs and a team of staff members.
Their responsibilities include planning and supervising all onboard entertainment, such as shows, events, and activities.
We went on an around the world cruise recently and had an amazing cruise director. It looked like such a fun job, and they got to travel everywhere that we did (of course!).
Recommended reading: How To Get Paid To Travel The World (18 Realistic Ideas!)
36. Astronomer
Astronomy is a field that combines the excitement of exploring the cosmos with the satisfaction of solving complex problems. As an astronomer, you enter a world dedicated to understanding celestial phenomena and the principles of the universe.
Usually, a Ph.D. in astronomy or a closely related field is needed to conduct independent research or work at a university. However, with a bachelor’s or master’s degree, you might find opportunities at planetariums, observatories, or assisting with research.
37. Netflix tagger
If you’re seeking a fun yet rewarding job, becoming a Netflix tagger could be an interesting option. In this job, you watch Netflix content and assign specific labels to shows and movies, influencing the platform’s recommendation algorithm.
To get started, you will need to apply through the Netflix jobs portal, where available positions are listed. Experience in film and media studies, while not mandatory, can give you an advantage.
Recommended reading: 7 Best Ways To Get Paid To Watch Netflix
37. Geologist
Geologists explore and study the earth’s composition, processes, and history.
Their job can lead to finding valuable resources like minerals, oil, and gas, and they also have an important part in environmental conservation and predicting natural disasters.
38. Dog walker
If you love pets, then this is the fun paying job for you!
Dog walkers do exactly that – walk dogs while their owners are busy, such as at work or on vacation. If you like dogs, then this can be a fun way to spend time with animals and get paid for it.
To become a sought-after dog walker, you should be reliable, good with animals, and you should have excellent customer service skills to build connections with clients. Dog walking allows you to enjoy the fresh air, bond with different dogs, and make money doing something you love.
Recommended reading: 7 Best Dog Walking Apps To Make Extra Money
39. Ethical hacker
Ethical hackers think and operate like malicious hackers but with a specific goal: identifying and fixing security vulnerabilities before they can be exploited.
They act as safeguards, testing and securing systems to prevent potential breaches for companies.
This job involves a lot of problem-solving skills, as you are looking for possible security problems.
40. Travel agent
If you like planning trips, then becoming a travel agent may be a great way to have a fun high-paying job.
Travel agents craft and sell travel experiences. They help advise clients on different travel destinations and arrange transportation, hotels, tours, and more. It’s a job that not only pays well but allows you to help others travel.
You may help people plan their honeymoon, a trip to Disney World, an around-the-world cruise, and so much more. There are travel planners for every kind of trip that you can think of.
Your knowledge and skill in handling the challenges of travel planning make you a very important help to travelers who want their experiences to be stress free.
The average annual salary can vary by a lot, and this can be either a part-time or full-time job. There is a lot of job growth too, as more and more people are going on vacations!
41. Personal shopper
Personal shoppers give a shopping service for clients who either lack the time or the style to select their own stuff. As a personal shopper, your job may range from picking clothing to finding the perfect gift.
You may work at a high-end retail store, or you may be a freelance personal shopper – there are many jobs in this field!
42. Park ranger
Have you ever been to a beautiful place like Yosemite National Park and wondered what it would be like to work there?
Park rangers work in places like beautiful national parks and get to enjoy the scenery every single day. Their responsibilities include protecting and managing parks, wildlife, and historical sites and making sure that both the natural resources and the visitors exploring them are safe.
To become a park ranger, you usually need a combination of education in fields related to conservation, environmental science, or wildlife management, and relevant work experience.
Recommended reading: 15 Outdoor Jobs For People Who Love Being Outside
43. Tour guide
Being a tour guide gives you a chance to share your love for travel or history with others, all while making a living. You’ll get to be in different places like historical sites, museums, or outdoor adventures.
This can be a low-stress job with a big fun factor – as you get to explore places that you probably already love and are an expert at.
Recommended reading: How to Make Money as an Airbnb Experience Host
44. Yacht crew
Working on a yacht can be a thrilling job that mixes travel, adventure, and the chance to meet new people, along with the possibility of earning good money.
If you work on a yacht, your job could be as a captain, mechanic, server, cleaner, chef, and more. If you’re on a smaller boat, you might even handle all these tasks.
Jobs on a yacht or big sailing boat are usually hard work, but the perk is that you get to travel with most expenses covered, while also earning a high income.
45. Flight attendant
Being a flight attendant is important for making sure passengers are comfortable and safe. You’re like the friendly face of the airline during flights, taking care of different needs and keeping service standards high.
Plus, you get to enjoy the unique perk of discounted or free travel, which is a big perk of becoming a flight attendant.
Flight attendants can earn a good income, and the benefits are excellent. They usually make between $50,000 to over $100,000 a year. The training to become a flight attendant usually takes around 1 to 2 months.
Recommended reading: How To Become A Flight Attendant And Make $61,640 Each Year
46. Art therapist
Art therapists combine the creative process with psychological healing to provide a unique kind of mental health therapy. They conduct one-on-one or group therapy sessions, and being an art therapist can be very fulfilling as you help people discover their voice and heal through art.
Art therapists work at schools, psychiatric hospitals, veterans associations, and more. Usually, you need a master’s degree to enter this field.
They use art therapy to assist people in expressing their emotions, dealing with complex feelings, and enhancing self-awareness. Their job isn’t just about being artistic; it’s deeply connected to therapeutic practices that help a variety of clients.
Another job similar to this is becoming a music therapist.
Frequently Asked Questions
Below are answers to common questions about how to find fun jobs that pay well.
What is the most high-paying fun job?
The most high-paying fun job can vary based on your skills and interests. Some high-paying fun jobs include being a blogger, pilot, stunt person, and romance book author.
What are random jobs that pay well?
There are many unique jobs, such as a private island caretaker, yacht captain, or a voice-over artist.
Which is the most exciting and highest paying job in this world?
This will depend on who you ask! Maybe it’s being a pilot, a stunt person, an actor, or something else.
What are some fun jobs that pay six figures?
Some fun jobs that pay over $100,000 may include becoming a blogger, selling printables, photographer, architect, and more.
What are some low-stress fun jobs that pay well?
Jobs like a yoga instructor or a massage therapist can be low stress and fun, and they provide a good income, especially when experienced or working in more affluent areas.
What are some fun jobs that pay well without a degree?
You can pursue jobs such as a social media influencer, a real estate agent, or a personal trainer, which can pay well and be rewarding without requiring a traditional four-year degree.
Best Fun Jobs That Pay Well – Summary
I hope you enjoyed this article on the best fun jobs that pay well.
There are many fun careers that pay a part-time or full-time income.
Careers like voice acting, managing social media, and ethical hacking not only pay well but also let you have a good balance between work and life. The key is to know your talents and find the right fit in these exciting jobs.
I have been working a fun job for many years now, and I really really love it. It makes each day enjoyable and I actually look forward to work. I hope that you get to one day say the same as well.
What do you think are the best fun jobs that pay well?
Reverse mortgages can be an attractive option for seniors who want to supplement their retirement income, pay off debts, or make home improvements. However, they should be carefully considered as they can have significant financial and legal implications.
Here’s how reverse mortgages work, the pros and cons, and what to consider before deciding if it’s right for you.
What is a reverse mortgage?
A reverse mortgage offers a unique financial option for homeowners aged 62 and older, enabling them to utilize the equity in their home without the obligation to make monthly mortgage payments.
Through this arrangement, homeowners have the flexibility to receive funds in several ways: a single lump sum, as ongoing monthly payments, or through a line of credit that can be accessed as needed. The defining characteristic of a reverse mortgage is its payment structure; rather than the homeowner paying the lender, the lender pays the homeowner based on the equity built up in the home.
This type of loan is specifically designed for seniors looking for additional income streams during retirement, leveraging the equity they have accumulated in their property over the years. The loan balance, including interest and fees, is deferred until the home is sold, the homeowner permanently relocates, or in the event of the homeowner’s death, at which point the estate is responsible for repayment.
Understanding How a Reverse Mortgage Works
Reverse mortgages enable senior homeowners to access their home’s equity in a flexible and strategic manner. This financial tool is especially beneficial for those who wish to remain in their home while supplementing their retirement income, covering healthcare expenses, or funding home improvements, all without the requirement to make monthly loan repayments. The process is straightforward and designed to provide seniors with financial relief by tapping into the value of their most significant asset—their home.
Step 1: Assess Your Eligibility
To kick things off, confirm your eligibility for a reverse mortgage. Requirements include being at least 62 years old, owning your home (or at least having a significant amount of equity in it), and using the home as your primary residence. You’ll also need to demonstrate that you can handle ongoing costs like property taxes, homeowners’ insurance, and regular maintenance.
Step 2: Calculate Your Home Equity
Your home’s equity is central to determining your reverse mortgage potential. Simply, it’s the difference between your home’s market value and any outstanding mortgage balance. The greater your equity, the more you might receive from a reverse mortgage.
Step 3: Select the Right Reverse Mortgage Product
Explore the different types of reverse mortgages available, including the federally insured Home Equity Conversion Mortgage (HECM), proprietary reverse mortgages for higher-value homes, and single-purpose reverse mortgages from certain state and local governments. Each type caters to specific needs and financial scenarios.
Step 4: Get a Professional Home Appraisal
An essential step in the process is obtaining a professional appraisal of your home. This assessment determines your home’s market value based on factors such as location, condition, and the sale prices of similar homes nearby.
Step 5: Undergo Counseling
A crucial step is to undergo counseling from a HUD-approved agency. This ensures you fully understand the reverse mortgage process, its financial implications, and how it fits into your overall estate planning.
Step 6: Decide How You’ll Receive the Funds
Reverse mortgages offer several options for receiving your funds: as a lump sum, in monthly payments, as a line of credit, or a mix of these methods. Your choice should align with your financial objectives and needs.
Step 7: Know When and How Repayment Works
No monthly payments are required with a reverse mortgage. The loan is repaid when the last borrower dies, sells the home, or the home is no longer used as the primary residence. Typically, the home is sold, and the proceeds are used to pay off the loan balance, including interest and fees.
Real-Life Example: Maximizing Loan Amount Through Equity
Imagine homeowners John and Mary, who own a home worth $300,000 clear of any mortgage. They qualify for a reverse mortgage that grants them access to $150,000. Opting for monthly payments, they supplement their retirement income, demonstrating how equity determines borrowing capacity and the flexibility in receiving funds.
Choosing the Right Type of Reverse Mortgage
When considering a reverse mortgage, it’s crucial to understand the different types available to you. Each type comes with its own set of features, benefits, and limitations.
Here, we’ll delve into the three primary types of reverse mortgages: the Home Equity Conversion Mortgage (HECM), proprietary reverse mortgages, and single-purpose reverse mortgages. By comparing these options, you can make a more informed decision that aligns with your financial situation and retirement goals.
Home Equity Conversion Mortgage (HECM)
Pros:
Federally insured, offering a layer of security.
Flexible payout options, including lump sum, line of credit, or fixed monthly payments.
Can be used for any purpose, without restrictions.
Cons:
Higher upfront costs, including mortgage insurance premiums.
Requires counseling from a HUD-approved agency, which may be seen as an extra step.
The loan amount is capped, which may limit access to equity for homeowners with higher-valued properties.
Proprietary Reverse Mortgages
Pros:
Designed for higher-valued homes, potentially offering access to more significant loan amounts.
May have lower upfront costs than HECMs.
Not subject to the same insurance and borrowing limits as HECMs, offering more flexibility.
Cons:
Not federally insured, which might pose additional risks.
May come with higher interest rates and fees.
Less regulatory oversight, requiring thorough due diligence by the borrower.
Single-Purpose Reverse Mortgages
Pros:
Typically the lowest cost option available.
Offered by state and local government agencies and some non-profits, intended for a specific purpose like home repairs or property taxes.
Interest rates may be lower than other reverse mortgages.
Cons:
Limited availability, as not all states and municipalities offer them.
The loan must be used for a specific, lender-approved purpose.
Not suitable for those looking for flexibility in how they use their funds.
Making the Right Choice
Choosing the right type of reverse mortgage depends on several factors, including your financial needs, the value of your home, and how you plan to use the funds. HECMs offer flexibility and security, but come with higher costs.
Proprietary reverse mortgages can provide access to larger sums for those with high-value homes but lack the insurance and sometimes the stability of HECMs. Single-purpose reverse mortgages are cost-effective for specific needs but offer limited flexibility.
Before deciding, it’s recommended to consult with a financial advisor or a HUD-approved counselor. They can provide personalized advice based on your financial situation and help you navigate the complexities of each option, ensuring you choose the reverse mortgage that best fits your retirement planning needs.
Eligibility Criteria for Reverse Mortgages
The FHA insures certain reverse mortgages, as long as borrowers meet certain requirements:
Be at least 62 years of age.
Live in the home as a primary residence (or your spouse, listed on the mortgage, must live in the home.)
Be capable of paying property taxes and homeowners insurance, as well as other maintenance costs and fees while you live in the home.
Meet FHA property requirements for the home.
Are you willing to attend a counseling session about home equity conversion mortgages (HECMs).
There are no delinquent federal debts on your account.
You’re more likely to get the money you need if you own your home outright, or if your loan balance is small so that you have a great deal of equity.
Reverse Mortgage Borrowing Limits
When you apply for a reverse mortgage loan, your lender will consider a few factors that will influence the amount of money you receive, including:
Your age
Value of your home
Equity available in your home
Interest rate
FHA mortgage limit for home equity conversion mortgages
Whether your fees are rolled into the loan
How you choose to receive your money
The older you are, and the more equity you have in your home, the more you’re likely to be approved for. Keep in mind, too, that fees associated with reverse mortgages are often much higher than fees for other types of home equity loans. That’s going to eat into how much you actually receive — even if you have a lot of equity in your home.
One of the perks of FHA-insured reverse mortgages is the fact that you don’t have to pay back more than the home is worth. So, if the value drops, and you owe more than it’s worth, you (or your heirs) might have to sign a deed in lieu of foreclosure turning it over to the bank. This is one reason many reverse mortgage lenders won’t actually lend you the entire amount of your equity.
You can use the money for whatever you want, whether it’s paying off debt, covering living expenses, or going on a vacation.
Accessing Your Reverse Mortgage Funds
If you get a fixed-rate reverse mortgage, you’ll receive a lump-sum payment. You can then take that money and do whatever you want with it. However, when it runs out, it’s gone. Some retirees use a lump sum to fund a retirement investment portfolio or purchase an immediate annuity. Others use the money to pay off debts or cover other expenses.
With an adjustable-rate HECM, you have different options available. You can choose to receive set monthly payments for a specific period of time or get payments for as long as you or an eligible spouse live in a house.
If you choose an open-ended payment schedule, you’ll likely get a smaller amount each month. However, you can be reasonably sure that you’ll continue to receive money until you pass on or move into a long-term care facility. With a fixed-term payment schedule, you could see higher cash flow every month. However, you run the risk of outliving the payments and trying to figure out what to do next.
Finally, you can also choose to use your reverse mortgage as a line of credit. You can withdraw funds as needed, up to the credit limit. This is a little more flexible and can be useful if you have other sources of income, and just want the HECM in case you need to fill a gap on occasion.
Pros and Cons of a Reverse Mortgage
If you’re considering a reverse mortgage, it’s a good idea to start with an FHA-approved lender so you receive protection. You can use an online locator to find a counselor who can help you with the process, or you can call 800-569-4287.
Carefully consider the pros and cons, too.
Pros
There are some ways to benefit from a home equity conversion mortgage that you wouldn’t see with a more “traditional” home equity loan.
No monthly payments as a borrower
Improve monthly cash flow
Pay off debt (including an existing mortgage on the home)
Non-borrowing spouse can remain in the home
Loan is paid off by selling the house when you pass on or move out
Cons
While a home equity conversion mortgage might seem like a no-brainer, there are some downsides to consider before you proceed.
High closing costs and other fees
You might not be able to pass the home on to your heirs
Costs associated with property taxes, mortgage insurance, and maintenance must still be paid
You’re draining a major asset—and you might still outlive your money
How to Spot and Avoid Reverse Mortgage Scams
Scams related to reverse mortgages are a serious concern, as they often target vulnerable seniors who may be seeking financial relief or have cognitive impairments. These scams can come in the form of dishonest vendors or contractors who promise home improvements in exchange for a reverse mortgage. However, they then either fail to deliver quality work or outright steal the homeowner’s money.
Similarly, family members, caregivers, and financial advisors may use a power of attorney to obtain a reverse mortgage on a senior’s home and then steal the proceeds. They may also try to convince seniors to buy financial products that they can only afford through a reverse mortgage, which may not always be in the senior’s best interest.
It’s important to be cautious and do thorough research to protect yourself from these types of scams.
Is a reverse mortgage right for you?
With a reverse mortgage, you can use your home as an asset if you know you’ll stay in it for a long time and need a little extra income for retirement. Borrowers who don’t intend to pass the home to heirs may benefit financially from the home during retirement. That is, as long as you can keep up with the costs of maintaining the home and pay property taxes.
In contrast, getting a reverse mortgage loan might not make sense if you can’t afford home maintenance or if you wish to leave your home to your heirs. When you’re no longer living in the home, your heirs will need to sell the home to pay off the loan. If not, they’ll have to pay the loan themselves to keep the house. If there’s enough money in the estate to pay it off, it will reduce how much ready cash they receive when you pass on.
Carefully consider your situation and your priorities before you decide to get a reverse mortgage. Then, make the decision most likely to benefit you in retirement and increase the chance that you’ll outlive your money.