Out-of-the-ordinary ways of earning an income are on the up and up. More and more, we’re renting out spare rooms on Airbnb, selling crafts on Etsy or moonlighting as Uber drivers to earn extra cash. But what do you do if eventually you want that side hustle to become your main gig?
If you have a side hustle you’re passionate about – and one with genuine potential for financial success – it may be worth exploring. Start with these basic questions before ditching your day job to pursue your dreams full-time.
Am I financially ready?
The last thing you want to do is take a leap of faith and quit your job only to realize you’ve jumped into the financial deep end. Do you have a financial plan in place? Have you saved enough to cover your monthly budget for six months if needed? Do you know how much you’ll need in your retirement, and are you tracking to your goal? Are there start-up costs to fund your entrepreneurial dreams, and do you have those in savings? It’s important to estimate whether the income from your side hustle will be enough to keep you on track with all of your financial goals and sustain you long-term.
Map out a prediction of your side hustle income along with your monthly expenses. Try creating a budget using Northwestern Mutual’s 20/60/20 breakdown: 20 percent of income should go toward saving and investing, 60 percent for essential expenses and 20 percent for discretionary spending. Online tools can be a lifesaver when it comes to revamping your spending and saving limits, and using budgeting apps can keep splurging on guilty pleasures to a minimum while you’re trying to save.
If you don’t already have a financial plan in place, you’ll need one now more than ever. Before making your move, meet with a financial professional who can advise you on the best approach and create a tailored plan to help maximize your chances of future success.
Have I set boundaries?
Once you’re actively running your business full-time, the temptation can be to prioritize the financial needs of your business over your personal financial needs.
It’s important to define boundaries along with your personal definition of success. Realistically, how much money do you hope to make in the first year of your business? The first five years? How much of your own money are you planning to invest at the ground level? And perhaps most importantly, will you at least break even?
Ask yourself the tough questions now to help reduce financial stress down the road. Start off on the right foot by meeting with a financial professional who can help you chart out a plan as you build your business.
What will help me achieve success?
Have a clear vision of what success looks like to you. Whether your goal is based on financial success or simply having more work-life balance, there are plenty of online resources to help your business succeed: online accounting software for balancing business finances, sites for building your online and social media presence, and even online business consultation.
Online tools can help you test out options that will make the most sense with your business plan. Online forums for having conversations with other entrepreneurs can also be extremely helpful – after all, these people have already faced some of the same challenges you’ll likely experience.
Despite the prevalence of online resources, don’t underestimate the value of meeting face-to-face with a financial professional who can give the personal attention you’ll want when considering this important life change.
The financial responsibility of becoming an entrepreneur can be a unique challenge. But, by considering these important issues beforehand, you can build a more solid foundation for your start-up and be on your way to making your passion a success.
It isn't always easy to stay on top of your finances, especially when you have developed unhealthy spending habits over the years. However, as you begin to realize the many benefits of having healthy finances, it can become something you want to make a conscious effort to improve. When your finances are in a good place, you often have access to better opportunities whether it be a mortgage loan, greater credit line or business loan. On that note, here is how you can become an expert at managing your finances in case you need a few tips.
Learn to Use Technology
The good thing about managing finances in the technological age is that you don't have to do it alone. There are so many apps available that will help you pay bills on time and track your expenses. For instance, some apps force you to live within your actual income and tell you what to do when you need to balance your budget.
If you need an app that will help you get better at saving, then some will set aside your spare change for you. Also, don't be afraid to use more simple tools such as your smartphone calendar to set reminders about payments if you don't automate them.
Seek Legal Advice
Sometimes, being an expert at something means understanding that you can't possibly know it all. This is why you have professionals around you that can help fill in the gaps where you're lacking. Consider hiring a legal firm to help with any challenges that are beyond you. Lexington Law is a good firm as they could help remove negative items from your credit report. Read this Lexington Law Review (Our #1 Credit Repair Service of 2019) to find out more about how they could help improve your finances.
You can't do better than what you know when it comes to managing finances. You should, therefore, invest your time in learning more about finances and how to manage them. Think about what your goals for your finances are and what knowledge gaps you need to fill.
For example, if you want to invest in the stock market so that you can improve your net worth, then you may need to learn more about investing to do so successfully. To boost your knowledge, try reading articles on credible blogs that share finance information from professionals. Also, be weary of content from finance-driven companies as it could be biased.
Work on Growing Your Income
As a self-proclaimed finance guru, you know that the more sources of income that you have, the better. Work on increasing your streams of income so that you have more money to meet your targets whether it's to save for a property or put larger sums towards retirement. One way to do so would be by getting extra income by doing social media marketing for businesses or creating tutorials on YouTube. If you own a property, renting out rooms is a great way to make passive income.
Live Within Your Means
It can be difficult to live within your means when you live in a society that is always presenting you with things to buy. However, being more conscious about the things that you purchase could help you realize that most are wants rather than needs. To live within your means, always take time to think about a purchase as opposed to impulse spending. You should always get good at bargain hunting as many times you can find items of similar quality at a cheaper price.
Learn How to Manage Debt
Debt doesn't have to be a bad thing if you understand how it works and how to manage it. It can be a tool for credit building when you understand the fundamentals. For instance, if you take out a loan or credit card, always be mindful of your interest rates.
By paying the amount of money you borrowed back in full before the due date, you won't have to pay interest on what you borrowed. If you can't pay back in full, paying more than the minimum payment will ensure you incur less interest. For the most part, the secret to good debt management is never spending more than you can afford to pay back.
Managing finances is a life skill that can help improve your quality of life. By following the mentioned tips and taking your finances more seriously, you're more likely to master the art of healthy finances.