Second income to secure your retirement

Who wouldn’t like an extra pay cheque? A side hustle that gives you extra income can be a feel good factor while you are working. However, this extra income can become a necessity once you retire. The loss of a steady income along with increasing inflation of goods and services can be challenging for many. There is a sense of safety, protection, and inner peace when you are not dependent on anyone else to provide for you during your retirement years. A bit of financial planning today will help secure your retirement and ensure you have a comfortable living while and after your working careers.

Turning a hobby into a business is a good source of second income. For example, if you love stitching, try to sell your products online or at exhibitions. Love cooking? Start a YouTube Channel. If you like writing or photography, why not charge for your service? If you have been involved in your hobby for many years, it’s time to start monetising your products/services. This is not only a good use of your time, but it also allows you to make a few bucks on the side.

For those of us who don’t have an exciting hobby that can be turned into a business, there are many ways in which you could garner some extra income. The old formula of saving in Fixed Deposits and living off the interest is barely helpful. Similarly, buying a second home and living on the rent is not as easy as it seems. Practical challenges like lower interest rate, lower rentals and the sheer logistics of managing everything are some of the deterrents.

We have for long enjoyed the benefits of our savings due to minimal inflationary effect on the value of our saved money. However, over the past two decades, inflation has created a major dent in our saving with tremendous depreciation of our money. Therefore, it’s very essential to start on the path of investing your savings and beat inflation over time.

Financial investments are a convenient and simple method to generate a second income quite easily. There are many investment options that can help you generate an alternate stream of income. Choosing the right plan (based on individual risk profile) through professional help and charting out a blueprint of needs and wants is the first step towards a second source of money.

Some of the methods of obtaining a second income from your investments are:

Systematic Withdrawal Plan: This provides a steady income and one can choose the frequency and quantum. SWP ensures a fixed amount gets credited to one’s bank account on a fixed date, similar to a salary. Since this is completely customised, there is no need to depend on any plan or performance related payouts.

Dividends: Opting for a dividend plan is similar to interest payout mechanism of an FD. However, in market related investments, dividends tend to be a slightly erratic form of income. Those who are not 100% dependent on this alone can opt for this plan. Dividends are paid out of accruals from performance over time. Amount and timings will wary upon performance.

Withdrawals: In this plan, you let your investment corpus be at work all the time and dip into it as a source of income only when you have a need that arises. Through this plan, maximum benefits for your money can be achieved because it stays invested and accrues gains over a period of time. This method ensures the maximum growth from your money and provides the cushion to withdraw money at convenience.

The writer is Founder & Managing Partner,Germinate Wealth Solutions LLP