Higher interest rates are putting South Africans under significant financial pressure, and many are looking for an income boost. Luke Martins, Financial Planning Coach at Old Mutual Wealth looks at investing as a side hustle.

It feels as if the Covid-19 pandemic happened a lifetime ago, with lockdown orders and movement restrictions having now faded into distant memory. But the pandemic taught us several lessons which still hold true today. One such lesson was the importance of having more than one source of income.

South Africans are under severe financial strain at the moment due to inflation and the current rising interest-rate scenario, and more and more people are understandably turning to side hustles to alleviate the financial pain of everyday living.

According to BrandMapp’s 2021 consumer insight survey, roughly 30%of middle-class South Africans (i.e. those with a monthly household income of R10 000) have some sort of a side hustle.

There could be a variety of reasons that you want to boost your income via a side hustle. It could be to meet your basic, monthly bills; to pay off the bond on your home sooner; to have provision for your child who wants to study internationally; to have financial security to face any situation; to retire comfortably; and/or to grow your overall wealth to secure the futures of your grandchildren and beyond.

Old Mutual Wealth asks ‒ and answers ‒ some Hard Questions to help you build your wealth for generations to come.

Why you should consider investing as a side hustle

By nature, a side hustle should not demand too much of your time, nor should it detract from your primary source of income.

Investing in shares as a side hustle allows you to have a share in a business that you don’t have to start or manage.

It also provides you with an opportunity for investment growth from countries that you have never been to (or those you have been to) and can also give you a stake in innovative technologies that you may never have thought of – all while you continue to focus on your day job. All of this results in your investment growing.

South Africa comprises only about 1% of the total global market in terms of the investment opportunity in shares.

By allocating a portion of your investments offshore, you could spread the risk, and enhance the possibility of generating better investment returns by diversifying and exploring what the other 99% of the global market has to offer.

In other words, this is an opportunity to own a share in companies that invest in cutting-edge technology, think differently about energy, produce self-driving cars, or invest in space travel development.

Offshore investing also offers a means to protect your investments against the depreciation of the rand, which is more relevant than ever considering it recently breached the R18\$ mark.

Making your shares work for you

By putting a portion of your money into a business and, as a result, owning a small share of it, you create for yourself passive income – income that you can withdraw and use to advance your financial goals. You can also use this for some emergencies.

Alternatively, you can reinvest your dividends and give your enhanced investment greater opportunities to generate more wealth. That’s because reinvesting dividends enables you to acquire more shares, thus enhancing your portfolio and positioning you to benefit more from compound growth.

Income from dividends does not deplete your investment value as you are not selling shares to receive your income.

It’s important to put your money into a mix of different asset classes. Asset classes refers to categories such as shares (or equities), bonds, real estate, commodities and currencies. Equities will give you the best opportunity for growth, so it is critical that these form part of your investment portfolio.

So why don’t you take a careful look at your household budget to create room to start your investing side hustle that will, over the long term, begin to generate the extra income you need for some of your goals and emergencies.

This article first appeared in City Press.