4 Reality Checks to Make Before Starting a Side Hustle
Thinking through a side hustle before you start is much better than facing a personal and financial reality check afterwards. While they are a great way to earn extra income, they don’t come without risks. In fact, depending on what you choose to do and how much time, effort, and even money you put into it, the second job you hope will change your life could do just that – but not how you want it to.
Here are 4 questions to ask yourself before starting a side gig:
1. Will the Side Hustle Cause Problems for Your Main Job?
A side hustle that causes problems for your main job will do more harm than good. On paper, the idea of getting paid an extra 5-20 hours per week might sound great, but actually working that could suck. After all, we’re humans, not machines. Losing sleep and personal time could take a big toll on your health and concentration. If that makes you perform worse in the job that pays your bills, then your career and financial stability could suffer.
Some people can work weekends and nights without breaking a sweat and some people would go crazy trying. Figure out your own limit. If you’re not already exhausted after finishing your main job and do want to squeeze more work in, then start small and build up as you go. For example, you could begin by working an extra hour or two per week and increase it after you see how you feel. Once you feel like you can’t do any more, stop doing more. This will help you avoid a painful and expensive burnout. However, if you do need to work longer than you can comfortably handle to make the gig work, then revise your plans and goals until you can fit them together without putting big risks on your health.
2. Does Your Side Hustle Fit Your Personal and Financial Goals?
Just as we work our main jobs for a variety of reasons, we start side hustles because they help us meet our own personal and financial goals. What are yours? Is this mainly a passion project that lets you do what you love? Or is it more of a tool to get extra income?
If your activity is mainly a passion project, then treat it as a hobby. The time you spend on it isn’t working time – it’s playing time. And since you’re not doing it for the money, don’t expect it to make any. If it does turn out to be profitable, then great. If not, then at least you’re having fun.
If you start your gig for the money, then it is a job and you need to treat it as one. That means valuing your time. After all, why work on the side for $15/hour if you could take an extra shift at your main job for $20/hour instead?
Extra jobs always cost time, but many people forget that they can also cost money. Make a solid business plan that proves your side hustle income will be higher than your side hustle expenses. Talk to a tax professional to see how extra income and expenses will affect your personal income tax return. If you need to be insured, ask an insurance agent about coverage, and make sure you have any required industry and municipal licenses. Just like with your personal budget, tracking your work expenses is key to success – that includes one-time costs as well as regular ones. Without ticking all the boxes, you could end up losing a lot of money on work that was supposed to earn you more.
3. Are You Okay with Failing at Your Side Hustle Business (A Lot)?
Many successful businesses started as side hustles, but countless more have failed. There are a lot of reasons why small businesses break down, but the fact is that most entrepreneurs fail several times before finally finding success.
If you’re working as your own boss, be prepared to not get it all right the first time. You should of course still plan to succeed, but you must also have a plan for when it doesn’t work out. In other words, don’t quit your day job and don’t take out huge loans that you can’t repay if your business fails.
Speaking of loans, it’s important to separate your business finances from your personal finances. Yes, you’ll probably have to put your own money into the business, and yes, you’ll be the one profiting from it. But what’s good for your business and what’s good for yourself isn’t the same thing. A loan might help your business grow, but if you have to sell your home to get it, would you really come out on top?
4. Does Your Family Support Your Side Hustle?
Side hustles take a lot out of families. Extra hours you work are less hours spent with loved ones, and when you’re putting off household chores and responsibilities to hustle, they’re the ones picking up the slack. If you’re spending money for the job too, then that could cause arguments over the family budget. Making sure your family is okay with your new gig is just as important as making sure you are.
When a family is having trouble with money, many think that getting a second job is the best way to solve it. While this is indeed a great way to boost your income, many don’t realize how much lowering your expenses by improving your financial plan can also help. At the very least, this will let you stretch your extra income farther.
Stressed Out About Money and Side Hustles? We’re Here to Help
Side hustles are not for everyone, which is why making a reality check before you start is important. But if you’re still not sure about it, have personal debt because of one, or want more advice on overcoming your unique financial challenges, then the Credit Counselling Society is here for you. Reach out to us toll-free at 1-888-527-8999, send us an email, or start an anonymous online chat. One of our credit counsellors would be happy to help you in a free and confidential appointment. After all, being fully prepared is another part of hustling.