05 May 2017

Why You Should Consider Pursuing a Side Hustle

Why You Should Consider Pursuing a Side Hustle

You've probably seen plenty of chatter out there about the emergence of the "side hustle" in recent years. In the personal finance world, it's an extremely popular topic to write about because so many people are looking for ways to make money right now.

A quick Google search will yield page after page of side hustle ideas that range from easy tasks like dog walking, to more complex strategies like becoming a virtual assistant or a social media manager.

While most of the ideas out there can seem a little fluky at first, side hustles (and ultimately secondary income streams) can actually provide a huge advantage for the people that commit to them.

Here are some reasons you should consider pursuing a side hustle this year:

Repay your student loans faster

One of the biggest challenges for mental health professionals after graduating is dealing with substantial amounts of student loan debt.

There are several strategies you can deploy to manage or pay student loan debt off faster, but one of the most effective ones is fairly straightforward: make more money.

It's easy to get wrapped up in all of the different aspects of personal finance, but the reality is that it comes down to simple concepts like saving more or making more. If you can do both, you'll be a financial rock star.

Admittedly, increasing your income sounds much easier said than done. However, a successful side hustle allows you to generate money independently from your primary income source, and can be a huge asset in paying off student loan debt early.

Even just an extra $250-$500 per month in side hustle income over the first ten years of your career equates to $30,000-$60,000 extra that can be applied toward student loan debt. You don't have to make a ton of money in your spare time to generate massive amounts of money over the long term.

More freedom to change jobs

Let's face it, the days of staying at one company or one job for extended amounts of time are quickly fading away.

According to CNN Money, a recent study by LinkedIn found that young professionals will change jobs as many as four times by the time they are 32 years old. Changing jobs is now seen as a faster way to advance in a career by negotiating salaries up by as much as 15% with each move.

So what does that have to do with side hustles?

While we would all like to have smooth transitions between jobs, it's just not always the case. Having extra money coming in from a small side business could be the difference between settling for a job you don't enjoy or holding out for the perfect gig.

Essentially, a side hustle can buy more time and also cut down on the anxiety that's often associated with being between jobs.

Saving up for a house or emergency fund

Most people have experienced that sinking feeling of writing a rent check every month, knowing that they could be building equity with their own home instead. The same goes for not having enough cash available in an emergency fund.

It's a little harder to sleep at night when you know you aren't quite prepared to handle a life curveball that might come your way.

Even if income from a side hustle isn't consistent, it can be a powerful way to build up a nice emergency savings fund of 3-6 months of income or a 10%-20% down payment on your first home.

A head start on investing

When you first start earning good money at a job, it's surprising how quickly that money gets allocated to other areas like rent or student loans.

Everybody knows they are supposed to be investing as much as possible for retirement and wealth building, but early in your career (when you have the most time for compounding interest to go to work) it can be a massive challenge.

Using the same numbers as the above example, the power of a small side hustle is pretty impressive: $250 per month of secondary income invested in the market (assuming a stock market average of 7% returns) over 10 years becomes $41,449.34.

$500 per month with the same criteria over 10 years becomes a whopping $82,898.69.

Potential full-time entrepreneurship

Side hustles can be a sneaky way to make a smooth transition to full-time entrepreneurship. While it might not be the goal from the beginning, it is entirely possible that whatever side hustle you choose to pursue eventually becomes your full-time job!

Most commonly, this happens because side hustles are built around things that people really enjoy doing. It's almost essential that a secondary income stream comes from some type of passion project, or by seeing and fulfilling a need in your current field that isn't being met the way you think it should be.

Once the income from a side hustle matches your primary income consistently over time, you have the option to pursue it full time with fairly low risk.

The other great thing about building a side business is that there isn't a rush to make anything happen too quickly. Having a strong primary income allows you to build something slowly over the course of years with much less risk than jumping into a larger business venture from scratch.

Don't expect it to be easy...

With all of this said, successful side hustles aren't nearly as easy as a lot of websites out there might have you believe. If you are seriously considering a second income stream, just understand that it will take the place of watching your favorite TV show in the evenings or replace a large part of your free time on the weekends.

It's really just like anything else – if you go into it expecting that everything will be very easy, you're probably not going to be successful doing it.

Take your time and do plenty of research on the competition, find out if there is a real need for the service you want to provide, and then go in on a secondary income stream with reasonable expectations.

-- Bobby Hoyt is a former high school teacher who paid off $40,000 of student loan debt in a year and a half. He now runs the personal finance site MillennialMoneyMan.com full-time, and has been seen on CNBC, Forbes, Business Insider, Reuters, Marketwatch, and many other major publications.

The opinions and advice expressed in this article are those of the author and do not necessarily reflect those held by the American Psychology Association (APA).

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