It’s amazing how many people still think that having a job is the only way to make any money. Maybe for your day job, sure, but what about if you want a little extra income on the side? Lots of people will just look for a part-time job in the evenings or on the weekends. But why don’t more people look into starting their own little business? Enter the side hustle.
As defined by Entrepreneur magazine…
A side hustle is a way to make some extra cash that allows you flexibility to pursue what you’re most interested in. It can also be your true passion – a chance to delve into fashion, travel or whatever it is you care about the most without quitting your day job.
Anyone who has been working for a while knows that your day job may not always be the most fulfilling. That’s OK. The purpose of your day job is to provide a measure of security, and a financial base and hopefully keep you moving forward in your career. You don’t need to love it every day. But a side hustle is different.
A side hustle is about finding something you truly enjoy and are passionate about and making some money with it. It’s a chance to be your own boss and if the whole thing ends up being a bust, then no worries. You still have your day job that pays the bills.
Take me for example. I’ve been an executive for years and enjoy my work. But, I have a passion for personal finance and want to start giving back to society. So I started this blog. It’s a ton of work, but I don’t mind because I’m passionate about the topic and the mission of helping everyone to Be Net Worthy.
Shouldn’t everyone have that kind of an outlet for their passions? With the growth of the internet, the proliferation of new business models, and globalization all coming together, the possibilities are endless. It doesn’t need to be an online business either, that’s just what I chose. You could walk dogs or sell paintings, whatever floats your boat.
O.K., enough with the sappy self-actualization talk and the babble about finding your passion, this is a personal finance site for Pete’s sake! Let’s look at the top three reasons why everyone should start a side hustle today.
Top Three Reasons to Start Your Side Hustle Today
Reason #1: Increase Your Savings Rate
The main reason to start a side hustle today is to increase your savings rate. Why is this important? Because your savings rate is the key variable in determining when you will be financially independent. If you don’t believe me, read, Are You Saving Enough. I’ll give you a hint though if you don’t know what your savings rate is, you probably aren’t saving enough.
There are only two ways to increase your savings rate. You can either increase your income or you can decrease your spending. Ideally, you can do both, but from personal experience, I can tell you that it’s more fun to increase your income.
What’s great about side hustle income is that you can save 100% of the profit if you want to. That can significantly increase your savings rate. Why is it so powerful? Because your day job is covering all of your day-to-day expenses. So, since your day job is covering all of your expenses, then 100% of your profit (after taxes) from your side hustle can go into savings, investments, etc.
If your savings rate is low now, you could easily double or triple it with a good side hustle. Personally, I’d recommend you take a big chunk, like 50% of your side hustle profit, and put it in savings and then enjoy the rest, or you might get burnt out. You should take whatever approach you are comfortable with.
Reason #2: Give Yourself Options
Are you familiar with financing options? They are financial instruments like “puts” or “calls”. I won’t get into discussing them here except to say this, their value is largely driven by the fact that they give you an option to buy or sell a stock in the future.
You don’t have to buy or sell, but you have the option. There’s a lot of financial value in having that choice. The same thing goes for a side hustle.
If things go well, maybe you decide to ditch the day job and turn your side hustle into a full-time gig. You have the option.
Maybe you lose your day job due to a layoff. Should you ramp up your side hustle to a full-time income? You have the option to try.
Maybe you develop some new skills that you can bring back to your day job. That gives you options for taking on new responsibilities at work or taking on new roles. There’s a lot of value to having options in life.
Reason #3: Beat Comparable Returns
Most side hustles can be started with very little capital. In this low-interest rate environment, how much could you make with your money in the bank or in a CD? 1% or 2%? Better to invest in yourself.
It’s very likely that the return will be greater. For a few bucks a month, you could set up a website to either start a blog or advertise your business. After that, everything else is profit.
If money is a constraint in starting your side hustle, it shouldn’t be. Take it out of the bank and invest in yourself. If you’re serious, you’re likely to get a solid return.
Why Not Start Today?
My advice? Make sure you don’t start this week, and definitely don’t do anything about it today. You are already too busy today and you have plans next week. Make sure to put it on your list of things to do at some point. And put it at the bottom. Wait a minute – what?
That was sarcasm. The biggest reason people don’t start a side hustle is that they never get started! And I’m not talking about people who do not want to start a side business. I’m talking about people who absolutely, definitely, without a doubt want to start a side hustle. Most never will.
If this is your excuse, then I think you need to make the time. Wake up an hour earlier every morning, stop wasting so much time on social media each evening or quit watching so much TV on the weekends.
If you are already happy with your savings rate and feel good about your options if you lose your job and are happy with your investment returns, then you are doing great! If not, it may be time to start thinking about a side hustle. There’s no better time to start than today!
Do you have a side hustle or would you like to start one? What percentage of your side hustle profit goes into savings? Has it given you options in life?