Why you probably don't need a side hustle
I want a side hustle. I’ve been told I need a side hustle.
I’ve tried my hand with lots of side hustles and they’re at this point all failures as business ventures. This blog? A very expensive hobby at best.
The problem is, the most lucrative side hustle I’ve ever discovered is just working more at my actual job.
This is quite possibly the case for you too.
Most claims of successful side-hustles are just very effective internet click-bait. Someone who hit the instagram algorithm lottery big. A side-hustle really isn’t a sustainable solution to your financial woes. In the USA most people have a spending problem, not an earning problem.
Which is kind of a lousy place to find yourself: spending money to launch a side business to get yourself out of a spending problem. Or using your influence to encourage someone to dig themselves into that same hole?
Why is all the financial advice we get online complete crap? It’s well documented that American students are not given a proper financial education so why is the best advice we can give to those seeking it basic common sense like cancel unused subscriptions, pack your lunch, stop using your cash as kindling to start campfires?
Let’s unpack some of the most popular advice:
1. Don’t even start until you’ve put $1000 into an emergency fund
And then start over and focus on your e-fund if you do use it.
Yes, absolutely, you should have a savings/rainy day fund. But you need to take your personal financial situation into account.
Maybe you are young and can rely on your parents to bail you out in the case of financial emergency (no shame). In that case you probably don’t need a large amount stored away. But maybe you have three kids, a spouse with health problems, aging pets… in 2019, $1000 is an insufficient amount to call an emergency fund. The thing about advice given on the internet is - it might not pertain to you.
My debt payoff advice? Just start. Now. Forget about the amount in the emergency fund, it will never be enough.
2. Get yourself a side hustle
You have a spending problem. See above. And if you do have an earning problem your time and talents would be much better spent networking, volunteering, learning new skillz…
I’m sure your kids are cute. The cutest. I’m sure your outfits are fly. The flyest.
But you have a better chance being struck by lightning than figuring out how to make money as an instagram influencer. I’m guessing. Plus, there is no amount of money worth the cost of posting a detox flat tummy tea pic.
3. Use the debt snowball method
Using the snowball method endorsed by Ramsey and many others you pay off debt with the lowest balance first. While Ramsey argues this simple approach keeps you motivated, math shows it’s not always the best idea to pay off low-interest debt before costlier loans.
There may be psychological benefits to Ramsey’s snowball method but there are many instances where it might make sense to pay things out of order.
Personal example: we had work done on our basement to the tune of $8k (insert very sad face). The monthly cost of the loan is around 120 bucks. We have another loan with a balance of $13k, however the monthly payment is 800 bucks. To me, it makes sense to focus on the loan with the higher monthly payment because freeing up $800/month is going to make a much bigger impact than working on the smaller loan first.
You might get a little jolt from paying a small credit card debt (or library card debt, totally been there) in full but sometimes the debt is simply going to take years to pay off. The psychological boost to putting extra money towards your student loans is nonexistent.
If you are at risk for giving up on paying off your debt because it feels insurmountable, then follow Ramsey’s advice to the letter. But if you don’t need the psychological boost to keep you going and would rather keep as much of your money as possible, then ignore it
4. Stop using credit cards
Closing all of your credit cards can have devastating impacts on your personal credit. It’s unrealistic to think you’ll never need a line of credit again. There is a way to use credit cards responsibly. Even when you’re in debt. We pay our preschool bill on our cc, get a 5% cash return credit to our account, and then pay the amount in full each month. That’s a 5% discount on our tuition bill which anyone who pays for preschool knows is SIG-NIF-I-CANT. Plus it’s helping build our credit history, a factor that accounts for about 15% of your credit score.
That all being said if you have more than three open lines of credit you do need to take some time to assess which accounts (1 or 2) you’re most loyal to and drop the rest. Even if they were happy to approve your opening of the account, creditors are not keen to trust someone with 15 credit cards.
5. While you’re in debt, the only time you should see the inside of a restaurant is if you’re working there.
I hate this. So much. First, it assumes that you are in debt because you are of weak moral character and deserve to be punished while you figure yourself out. There are a lot of reasons you might be in debt that have nothing to do with consumer credit cards: school loans, medical bills, divorce, started a business...
My husband and I are (finally kinda) high earners but it took years of school to get here. We have a student loan debt the size of Mount Crumpit. Paying our student loans will take years.
I don’t think we can put off living for years.
I do think a zero-based budget is the best starting point and I know people who have been successful using this advice. And I actually do love Dave Ramsey, I think he has a huge heart and wants everyone to experience financial freedom. But I’m not in debt from Starbucks and large car payments. Where to seek financial advice in 2019? IDK, text me if you know.