Another Stream of Income: Taking Your Finances to the Next Level

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Maybe cold, hard cash isn't your sole reason for employment. However, it's hard to argue that another income stream is anything but a good thing for your family's financial fortunes.

With this column, I'll skip the hard part of the employment process -- finding a job -- and assume you and your spouse or partner have already combined your talents with the resources that are available to become a dual-income household.

Several years ago, I was working with a couple to pinpoint their spending habits. I can still remember the discussion. The long and short of it was that despite much more income -- two salaries instead of one -- they struggled to make any financial headway. So, that's my focus here. While more income is nice, it doesn't always translate to financial goodness. A thoughtful approach is necessary to ensure you don't squander the opportunity.

Here are four ideas to consider as you make a plan to, pun intended, put the fruits of your labor to work.

1. Prioritize your money tasks. Chances are, you already have a solid list of financial goals. If you don't, it's time for a family huddle. Items on your list might include paying off debt, saving for short- and long-term goals, education for the kids and, of course, retirement. Unless your new income stream is more like a tsunami, you'll need to rack and stack the things you want to accomplish and deploy your new-found income accordingly.

2. Make changes over time. This is where the couple I mentioned went wrong. New house, new car, country club membership -- you name it, they were all in on ramping up their lifestyle. Unfortunately, while they had cooler stuff, they were no closer to being financially secure. Heck, you could argue the big-ticket debt they took on actually made them more vulnerable. I'm not saying you shouldn't tweak your lifestyle by expanding your expenses or enjoying more "services," I'm just saying to roll it out thoughtfully and slowly.

3. Leverage benefits. The military provides a fantastic package of benefits, but don't overlook opportunities offered by your new employer. They might range from tax-saving spending accounts to additional life insurance coverage. Sure, you probably don't need health care coverage, but don't turn a blind eye to the other offerings that may be out there.

4. Clean up on retirement. Last month, I was part of a virtual lunch-and-learn session for a group of small-business owners. I was getting downright excited talking about the potential for some folks to put away $50,000+ for their retirement using small-business retirement plans.

When I scanned the faces on the perimeter of my computer, it was clear my enthusiasm had not caught on. I get it, there's a lot going on in our lives. However, a new income stream could provide an opportunity to boost what you're saving for retirement. Don't overlook all your options, including your employer's retirement plan, your small-business plan, your spouse's Thrift Savings Plan, and other accounts like IRAs.

Good luck in the upcoming year!

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Personal Finance