Why starting a side business beats the stock market

Sowing seeds in a side businessStarting a side business may be the best thing you can do to get ahead. As with second jobs, a side business can be a way to generate income on top of your existing work.

Consider this. Let’s say you start consulting as a side business. You manage to average $500 a month. That’s $6,000 per year. To get the same returns from investments, you’d need a 5% return on $120,000 or a 10% return on $60,000. Sure, the investments are passive, but you have to have them to make that money. If you start working on the side, you can start making that money right away.

In fact, because of tax write-offs, you may find out that more of the business income remains in your pocket than the investment income does.

Of course, you don’t want to be scrambling to work when you’re 90 years old. So it makes sense to use your side earnings to pay down debt, save for retirement or meet other financial goals. If you’ve got a nice emergency fund and you’re meeting all your financial goals, you might be able to use your side business to pay for other dreams, such as vacations.

What could you do with an extra $500 a month?