Boosting savings and eliminating debt are important steps to take to improve your finances. But that, alone, is not enough to build wealth. We must also focus on ways to generate more income. A great option for this is finding or creating side-hustles—additional ways to make money besides your main source of income.
Most of us think of side hustlers as people who run businesses on the side, in addition to a traditional nine-to-five job. That’s true, but it’s more than that, especially in today’s job market, where freelancing, self-employment and temp work can be pursued as primary careers, not just emergency fall-back options. It’s about thinking of other talents, skills, interests and experience you can use to make money, which may not have value in your main line of work, but could be of value to others, and therefore can be monetized, especially in the age of social media, e-commerce and e-mail marketing and service delivery.
Generating income from multiple sources can help you eliminate debt, build wealth and provide a financial cushion should you be laid off or want to change jobs. It’s the ancient wisdom of not having your eggs all in one basket; having more than one source of income gives you both flexibility and security. Here are some steps you can take to identify your side-hustle potential:
Think of ways you can make money with a skills that you are only partially using, only pursuing as a hobby or not using at all. Sit down, with pen and pad, or your laptop or tablet, and do a real assessment of your skills, abilities, hobbies and passions. Include the skills you use in your main job or profession (as well as things you learned to do earlier in your career that your current position may not require you to do), but go beyond that. What are you good at? What have you excelled at in the past? What do you have a strong interest in learning and doing? What credentials or continuing education courses can you pursue to qualify or certify you to charge for what you know or you can do? Another clue: what are friends and family always asking you to do as a favor to them? Others might pay you to do that!
Once you’ve completed your list, search the terms on the Internet and see what kinds of part-time, consulting, freelance and small businesses come up. These will provide clues to how you can identify side-hustle opportunities for yourself.
Have a clear understanding of your primary employer’s policies on developing businesses, soliciting customers, consulting with clients or providing services, both during business hours and on your own time. Be clear on any potential conflicts of interests and how you will avoid them before you launch your side-hustle. You don’t want to risk your primary salary–and especially health care or other benefits–by putting your main source of income in jeopardy. And unless it’s absolutely necessary, don’t make your side-hustle a topic of conversation at your main job. Even if your employer doesn’t mind, your co-workers may not appreciate it.
Make a serious commitment to time management. Make sure you set realistic goals for all the demands on your time from your primary job, your side-hustles, as well as the demands of family or other obligations. You don’t want your performance to be called into question at your main job, nor do you want to limit the money-making potential of your side-hustle by giving less than your best effort. Work-life balance is an even bigger challenge, and therefore must be a bigger priority, for side-hustlers than it is for people focused on a single job or business.
Don’t forget the IRS. Keep documentation of all income from your side hustles, as well as related expenses, organized and accessible. Otherwise, you could face a real nightmare when it’s time to file taxes. You could also miss out on significant tax deductions for expenses related to your side-hustle work. For example, you may be able to dedicate a specific room in your house exclusively for a home-based business, which might qualify you for a deduction. Your best bet: sit down with a tax professional, and ideally, a financial planner, to get help with understanding tax obligations as well as what deductions you may be eligible for and what you have to do to qualify for them. After all, there’s no point in generating additional income if you’re so disorganized that you end up giving it all up to the IRS in missed deductions, fees and penalties.