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Taking another job is a way to earn a second income. But he's not the only one.
You could try to make more money by investing in carefully selected blue-chip stocks. Unlike taking a second job, that wouldn't mean you'd work more hours each week.
Below I explain how I would do this in practice and what size of second income I hope to make.
Financial success is based on financial realism
The desire to earn a second income often arises from needing or wanting more money. That may mean there may not be much money left available to put into the stock market.
So my starting point would be an honest assessment of how much I really feel I can invest in stocks. Each one has their own answer. In this example, I use £90 per week.
The reason I mention regularity is because I think habit formation is important when trying to generate a second income.
You could just save extra money when you had something, but would you actually do that? I think having a savings goal set regularly could help my discipline.
Getting ready to invest
However, the cash sitting in the closet is not ready to be put into the stock market.
You would then set up a shares trading account or stocks and Shares ISA.
I would also read about the stock market and try to learn how to be a good investor.
Find stocks to buy
My next step would be to make a shopping list of stocks to buy.
Note that I'm talking about multiple stocks here, not just one. There's a simple reason why I wouldn't put all my money into my best investment idea: it could turn out worse than I expect!
To illustrate the type of action you would be looking for, consider B&M (LSE: BME).
The discount retailer has a large market of potential customers that it can target. Demand for items such as household essentials and groceries is likely to endure. On the one hand, it is a crowded market. This poses a risk to B&M's profit margins. So does the high international shipping rates as it imports many products from abroad.
But it has what I see as competitive advantages: a highly skilled sourcing operation, a strong brand and a large existing customer base. The company announced full-year results this week that showed continued revenue growth in each of its business divisions.
If I had extra money to invest, B&M is the kind of stock I'd be happy to put in my shopping basket.
Calculating income
However, with a 3% dividend yield, B&M would earn me just £3 a year for every £100 I spent on its shares, if the dividend remains at its current level. I would like more!
My £90 a week adds up to £4,680 in a year. With a higher average return (say 6%) that should give me a second income of around £281 a year.
However, if he had kept going, after five years he would have saved more than £23,400 to invest. With a 6% return, that could give me a second income of over £1,400 a year.
