photo credit: gwdexter
What would you say if you could make $500 in extra income and no work was required? You would want to know what the catch was, right? I know three couples that are facing this very same question and they are measuring the risks and rewards as it will impact the entire family and the current living arrangements. I’m not talking about asking your boss for a raise or even going out and finding an alternative income source. An extra bedroom is all that is needed for the potential $500 in extra passive income. The rental income would be passive as you have already invested in the building. Would you be willing to have a roommate live in your house, condo, or townhouse for an extra $500? You could possibly make more if you had more than 1 bedroom to rent.
How would you spend an extra $500 a month?
1. Mortgage payment. This should be your primary goals. Don’t consider the extra $500 as spending money but as a resource to pay your mortgage. It will also be tempting to spend an additional $500 a month and you might want to setup an auto deduction program from your checking account.
2. Payoff credit card debt. If you are able to make your mortgage payment but are still late or just paying your minimum due, the extra $500 will apply towards CC debt. Maybe your teaser 0% rate from Chase or American Express is set to expire and you don’t know where you are going to get the money to make your minimum payment. Many wonderful articles have been written about the debt snowball effect by Dave Ramsey and basically puts the emphasis on paying off your smallest debt first. The minimum payments will still be paid towards your other debt, but Dave Ramsey suggests paying all additional funds to your smallest debt first. Then once that debt is paid, do the same technique for your second smallest bill. Repeat process until all debts are repaid.
3. Home equity line of credit (HELOC). Maybe you recently renovated your home or added an extra bedroom and have amassed a balance on your home equity line of credit. The extra $500 from a roommate could allow you to repay this debt to the bank more quickly. Maybe you have tapped out your equity, but still have more building plans you would like to accomplish. Having a roommate could help repay the loan and allow you to build your dream home. Find a roommate with carpenter skills and you might save even more money.
4. Private school. Maybe you are not happy with the public schools in your neighborhood or you want to send your children to a private school. In our neighborhood private schools cost $450-$750 a month. Having a roommate could pay for your childrens education.
5. College. Do you have a 529 college savings plan for your children? Would you consider a roommate as an option to build $500 a month towards college for you kids?
Maybe you have a roommate now and are benefiting from the added income. I would be interested to hear how you have utilized the added income. If you are facing financial stress, would you consider having a roommate to save your home from foreclosure?