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. 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.
Why is all the financial advice we get online complete and utter crap? It’s well documented that American HS 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 subscriptions you don’t use, pack your lunch, stop using your cash as kindling to start campfires?
Let’s unpack some of the crap shit advice Dave Ramsey has been giving (and everyone else has been recycling) for the past 30 years:
1. Start an emergency fund of $1000 before putting any extra money towards your debts
Yes, absolutely, you probably need a savings/rainy day fund. But you need to take your personal financial situation into account to determine how much money you should save.
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. I am a member of a union and a few summers ago we went on strike for a week and then for an additional six weeks. So in my personal situation, $1000 is a laughably insufficient amount to call an emergency fund. The thing about advice given on the internet is - it might not pertain to you personally.
2. Use the debt snowball method
Using the snowball method endorsed by Ramsey you pay off debt with the lowest balance first, regardless of the interest rates. While Ramsey argues this approach keeps you motivated, simple math shows it’s a bad 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 a debt might have a low or 0% interest rate. That’s basically a free loan. Having that debt costs you nothing so it’s far more financially prudent to focus on debt with the highest interest rate 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 even with extra payments. The psychological boost to putting extra money towards your mortgage or 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. 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
3. 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. Maybe there were not 0% interest cards with benefits when Dave first came on the scene, idk. But I do know we pay Ezra’s preschool bill on our cc, get a 5% cash return credit to our account, and 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.
4. 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 it’s wise to put off living for years.
I really don’t follow the “Live like no one else so you can live like no one else”.
Even living a spartan lifestyle and aggressively paying our debts, we will be practically dead when we are debt free. That doesn’t seem like a great time to give yourself permission to start living.
I do think Ramsey’s zero-based budget is a great starting point and I know people who have been successful using his advice. But I think some of his advice is basic and outdated. Where to seek financial advice in 2019? IDK, text me if you know.