I argue that before starting a side hustle, you should economize.
Side hustles are great when they are started for the right reasons. A side hustle can be a liberating and empowering venture, or an additional source of stress and misery in your life.
“Before Starting a Side Hustle” summary
- The growth of Side hustles
- Positive side-hustles and negative side hustles
- Growing your cheapness side hustle
Before starting your side hustle, think about why side hustles have gained such popularity.
Moonlighting is nothing new. People have always used side jobs to make ends meet or pursue an interest. However, there are certain factors in today’s job market that have led to a widespread side hustle phenomenon.
The gig economy
You are not a beautiful and unique snowflake (to your employer). There is no doubt that what it means to be “in the work force” has changed. The 1% have commodotized workers like never before. Workers know that finding a stable company that is willing to invest in them and protect that investment over time is unlikely.
Many workers now find themselves in the nebulous gig economy where even advanced skills are only valued on a short-term basis.
People who feel like a disposable commodity feel great insecurity. They could be “re-structured” right out of job. Your position, company, or even industry could disappear with the stroke of a pen.
With this insecurity comes the growth of the side hustle. Under such conditions, it is only natural that people want to reduce their risk by diversifying their income.
This chart shows demonstrates how the middle-class share of the national income has declined over the decades. The middle class is shrinking, and wages have barely kept pace with inflation despite increased productivity.
Many people want to start a side hustle to express their creativity and ingenuity. For many of us, our jobs are just what we have to do pay for the rewarding and exciting experiences of life. If your job is not as fulfilling as you would like, perhaps a side-hustle will give you the outlet that you desire.
Before starting a side-hustle, think about your reasons
Why are you thinking about starting a side-hustle? Are your motivations coming from within or without? Do you just need to make ends meet, or is there a more meaningful drive?
Intrinsic motivations (the right reasons)
If you are looking for a way to reach personal financial goals, express your creativity, transition to a new career, or conquer new challenges, you are starting a side hustle for the right reasons.
These reasons are coming from you, not from stacks of bills or social pressures.
If your motivations are coming from without, your desire to start a side-hustle is based on fear, disappointment, need, anxiety, or loss. You are not starting a side-hustle because you want to.
A person driving for Uber might be doing so for the right reasons or the wrong reasons. The right reasons might be getting out and meeting people, saving for a special reason, or simply to enjoy driving. On the other hand, a person might be driving for Uber after a long day a work when they would rather be spending time with their family.
Case study: Former Eagles football player Jon Runyan drives for Uber. After fourteen years in the NFL and two terms in congress, he does not need the money. He explains that he gets bored sometimes and likes helping people out. He gets a kick out of it when football fans recognize him.
Spending what you earn
Before starting a side hustle for the wrong reasons, think about why you need to make ends meet.
As a society we share a compulsion to spend everything that we earn. Afterall, you earned it. I recently heard a statistic that 83% of American retirees would not be able to come up with $600 on short notice. (Sorry, I can’t find where I read this). We have moved from “you can’t take it with you,” to “whoever dies with the most debt wins.” Article link: “This Is What Life without Retirement Savings Looks Like”
Some people who make $30,000 a year are able to save, and some people who make over $200,000 a year are living paycheck to paycheck. The difference is spending. Living within your means means living below your means.
Case study: A friend of mine, a young teacher, was still living with her parents. I was bit surprised, but I figured she had her reasons. She was one of those Disney-obsessed people, and she spent her summers in Orlando telling people when it was their turn to go down one of those big water slides. (She probably just needed a break from hanging out with her parents.)
After knowing her a few years, I was excited for her when I found out she had bought her first home….in cash. Suddenly, everything about her made sense. Her teacher’s salary will go a lot further without mortgage payments. Now she probably spends her summers in Orlando riding the water slides. Good for you, Ms. H.
Get your spending in check before starting a side hustle.
The person who earns a decent income should only think about starting a side-hustle for two reasons.
- First, the side hustle is a desirable pursuit, challenge, or activity.
- Second, the job security at their job is questionable, and they want to diversify their income.
The reason should never be to “make ends meet.”
If you make a decent income, but are thinking about a side hustle because you can’t make ends meet, you are walking into a trap. It is entirely likely that you will be working harder, spending more, enjoying life less, and still be living paycheck to paycheck. Further, your greater spending has made your security even worse should either the side hustle or primary employment suffer a setback.
Unless you are really excited about your side hustle idea, take a long, hard look at your spending before you start. There are some costs of living that you can do almost nothing about, but think about everything that you can control:
- Reducing your rent or mortgage by moving or sharing expenses (I know, no on wants to here that.)
- Reducing your car costs
- Changing vacation plans
- Controlling shopping
- Reducing communications costs
- Reducing home entertainment costs
- Reducing monthly food costs (Eating out less is a huge savings.)
- Switching out expensive hobbies (e.g. snowshoeing instead of skiing, or hiking instead of golf)
- Taking on home projects instead of paying someone else to do them
- Making homemade gifts instead of buying them
Related post: Thrift Store Tips to Become a Jedi Master of Resale.
Live well and hustle less.
Cheapists put a high value on their time. Better living on less might even mean living full time and working part time. For most side hustles, you are essentially trading time for money. Do you really want to trade that time?
Case study: I have driven for Uber, so I will use this in my example. After taxes, car maintenance, gas, etc…, I made about $10 an hour driving for Uber. Perhaps I spend four hours a week driving and bring in $160 a month. Wouldn’t it be better to find a way to save that money and get my Saturday afternoons back? Could I save $160 by making trips to a bargain grocery store, cutting off the cable, using a more economical vehicle, eating out less, etc.? How much are my Saturday afternoons worth?
Conclusions on being cheap before starting a side hustle
A penny earned is a penny taxed. Furthermore, a penny spent (in most places) is a penny taxed. A penny saved pays no taxes (we’ll table discussions of interest income tax and capital gains tax for now).
Think about reducing your spending like it is a side hustle. This is a job that takes very little time, pays no taxes, and can keep paying you forever. If you can crack the puzzle of enjoying life on less money, you are setting yourself up for a life of comfort and security. Once you are used to spending less and are able to save, your security has improved in two ways: you have an emergency fund, and it will go farther when you need it.