My Money Made More Than My Side Hustle This Year
By: Matthew Kent
Tags: Investing, Stock Market, Money, Side Hustle, Personal Finance

My Money Made More Than My Side Hustle This Year

Photo by Ishant Mishra on Unsplash

I’m writing this on December 12, 2019, and my portfolio balance is $89,492.

On January 1 it was $59,292. The numbers happen to be easy enough to subtract in your head: I have $30,200 more than I did at the start of the year.

Where did that extra money come from? Well, $11,971 came from me actively investing new money this year. But that means that a whopping $18,229 came from my returns (some of which came from dividends, but most of it came from the appreciation in value of the stocks I owned).

So I must have done a pretty good job buying and selling stocks huh? Not really, I don’t buy individual stocks, I just invest my money in a low-cost total stock market index fund.

There are actually two secrets to how I made $18,229 with a boring, automated strategy:

The Stock Market Had a Good Year

The S&P 500, an index of the largest companies in the stock market which is used to represent the stock market as a whole, is up an astonishing 25% so far this year.

Is this normal? Absolutely not. But on the other hand, there’s no such thing as normal. You’ll hear people say that over time the annualized return of the stock market is something like 7%, but very few years does the stock market actually have a return close to that number. Some years the stock market might return 2%. Some years it might return 20%. Some years it loses money.

But over time, the market tends to go up. Some years are better than others, and this has been a really good year.

So that means I got lucky, right? Well, not exactly. I wouldn’t have made nearly as much money this year if it weren’t for my second secret:

I Had a Decent Amount Invested

What’s 25% of $100? That’s an easy question, $25.

What’s 25% of $50,000? A much more impressive $12,500.

What’s 25% of $1,000,000? It’s an astonishing $250,000!

The point is, the more you have invested, the more money you make when the market goes up. When you have a lot invested and the market has a really good year, you can make a staggering amount of money.

This is what the power of compound interest really looks like.

So how do you get a large enough portfolio to take advantage of when the market has a huge year? You do it drip by drip, putting away as much as you can whenever you can.

I know when I used the language of “secret” you were expecting some “hack” that gave you quick results with minimal effort. Sorry, that doesn’t exist.

If you’re disciplined about saving, patient enough to build a portfolio, and don’t panic when the market takes a downturn, you’ll be set up for success. Time and compound interest will work their magic and you will look like a genius.

My Portfolio Made More Than My Side Hustle

I’m just a regular guy who works a very normal 9–5 job, but I firmly believe that no one should limit themselves to one source of income.

My side hustle consists of making money in various ways online. Medium is my largest source of online income, but I also have other streams of income like a Kindle book that I published, freelance work, and YouTube ad revenue.

In 2019 I’ve made $9,528. What’s great is that this money has been semi-passive. I say “semi-passive” because I’ve only worked half as hard as I’ve wanted to.

My wife and I welcomed our third child last month, and although this is an unambiguously joyous development, it has meant that I have devoted way less time to my side hustle this year than originally planned.

Fortunately, the work that I’ve put in previously keeps making money. I’ve received decent sized checks from Medium the last two months despite having not published anything new during those time periods (this is the first time I’ve published since September 5th).

The opportunity of making semi-passive income is part of the appeal of making money online for me. I eventually hope to replace my 9–5 salary with my writing income.

That being said, the money I earned from the stock market this year was fully passive. Sometime long ago, I set up automatic paycheck contributions to my 401k. Sometime later, I set up automatic bank transfers to my IRA. A few times this year I’ve manually logged in to invest some of my writing income — but that’s as close as I’ve come to active work: a few logins.

Scoreboard: $9,528 in semi-passive income vs. $18,229 of fully-passive income.

Don’t get me wrong, I’m still all-in on my side hustle. I love writing on Medium and hope to keep doing it for years. But the lesson is clear: don’t sleep on the power of investing.

Things You Won’t Regret in 2020 (Or Beyond…)

Start a side hustle

Come up with a simple investment strategy and put it on autopilot

You can do this. The only question is will you?