How to Make Money (Legitimately) from Home

Money Girl discusses why you should create multiple sources of income, the best ways and places to get started, and important tax considerations - plus tools and tips to make sure you manage home business income the right way.

Laura Adams, MBA
7-minute read
Episode #382

Tip #2: Be Open-Minded About Opportunities

There are two basic ways to make money from home: providing a product or a service to individuals or businesses.

  • Provide a product: If you have something unique or interesting to sell, such as vintage wedding dresses, original art, jewelry, or handmade furniture, you can create a store on sites like Etsy, eBay, or Amazon.
  • Provide a service: There are hundreds of services that are in demand. Examples include copywriting, fitness training, pet sitting, guitar lessons, virtual online assistance, daycare, tutoring, or editing audio.

An increasing number of large companies are hiring remote workers for positions such as customer service representatives, advisors, trainers, graphic designers, and user experience analysts. Use a site like Indeed to do a job search for home-based opportunities.

Check out the following peer-to-peer sites and services that allow you to find people who want to pay you:

  • Taskrabbit is a marketplace where you can help others in your area with basic tasks such as moving, hanging pictures, cleaning, or organizing.
  • Uber allows you to collect a fare as a professional driver, in some major cities. 
  • Airbnb allows you to rent out a room in your home. 
  • Usertesting.com allows you to get paid for simply using websites and giving feedback about their usability. 
  • Fiverr is a marketplace where you can provide services or products in over 100 different categories, such as translation, graphics, and tech. 
  • Elance allows you to bid on freelance jobs in many different niches, such as programming, writing, marketing, customer service, and administration.

See also: Tax Deductions for Your Job Expenses

Tip #3: Start Slowly

I recommend that you never jeopardize your primary source of income while building other revenue streams.

An Academy of Management study found that keeping your day job while dipping your toes into entrepreneurial waters can cut the risk. I recommend that you never jeopardize your primary source of income while building other revenue streams.

Also, don’t spend a huge amount of money creating a side hustle. While there are success stories about people who risked everything on a start-up and succeeded, I don’t recommend that you rely on that strategy.

If a venture you start really takes off, you can always quit your day job later on and give it your full attention. Or you may be like me and decide that your goal is to have the security and benefits of multiple revenue sources.

While starting any side hustle can be risky, many can be done in your spare time and with little or no money. For instance, I’ve written many books, including my award-winning paperback, Money Girl’s Smart Moves to Grow Rich, while working full-time.

I’m very entrepreneurial, but also somewhat financially conservative. So when it comes to starting something new, I prefer the "crawl, walk, and run" approach. The idea is to create a side venture to improve your financial life, not one that ends up hurting it.

See also: How to Make More Money (Without Getting a Second Job)

Tip #4: Understand the Self-Employment Tax

When starting a side hustle or any home-based business, many people don’t realize that you pay much more tax on that income than you do working a W-2 job. That’s because employers are required to subsidize every employee’s tax liability, and they pay half of your Social Security and Medicare taxes on your behalf every year. 

No matter if you call yourself a freelancer, independent contractor, or entrepreneur, when you make money on the side, you’re a small business owner. That means you’re responsible for paying the whole tax enchilada. The extra part is called the self-employment tax, which is required in addition to ordinary federal or applicable state income tax.

For 2014, the self-employment income tax rate is 15.3% of net earnings from your business. That amount is made up of 2 parts: Social Security (12.4%) and Medicare (2.9%). You only pay Social Security on the first $117,000 of self-employment income, but the Medicare portion applies no matter how much you make.

So, my advice is to set aside a minimum of 30% of your side business income throughout the year. Work with a certified tax accountant, because being self-employed generally requires you to make estimated tax payments every quarter, based on your income projections. For more information, see IRS Publication 334: Tax Guide for Small Business.


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlersbook is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.