Guest post blog by Brooke Webber.
Today, having more than one income stream is completely feasible. With current economic uncertainties and inflation, it makes sense that individuals worldwide are increasingly seeking new ways to supplement their everyday earnings. But it’s not only extra cash that’s alluring, as more people embrace digital tools to monetise their creative hobbies, it’s clear that pursuits of passion are also very much driving the side hustle trend.
Self-employed content writer, Brooke Webber, tells us that Millennials (born between 1981 and 1996) and Gen Z (born between 1981 and 1996) may be the biggest beneficiaries of the side hustle explosion. Compared with only 24% of boomers, in the United States, 50% of millennials and 46% of Gen Z have side hustles, with the most popular choices nested in technology.
Do Millennials and Gen Z dominate the side hustle stakes?
“Being eCommerce native, not to mention au fait with social media and no stranger to shared economy apps, more people are leveraging technology to generate additional income,” Brooke says. “By monetising YouTube videos and blogs, taking up flexible freelance gigs, and cashing in on social media affiliate marketing (some of the most common and lucrative side hustles) many digitally skilled young guns are taking the plunge.”
Although millennials and Gen Zs may have entered the world later in the game than their Gen X and boomer counterparts, they’re fast proving their financial planning and money-making power. (For example, after recording the highest increase in retirement savings in any age group in 2022, studies show that Gen Z is making moves to secure their retirement plans through early super contributions.)
Setting your side hustle up for success
“As much as the human resource industry is headhunting for talents, we’ve noticed over these past few years that many of these talents have more than one income stream on their resumes—a testament to the role the internet has played in giving more flexible opportunities for job seekers,” says Linda Shaffer, chief people operations officer at Checkr.
So, from setting budgets to tracking expenses and increasing revenue streams, let’s explore some financial strategies for successfully supplementing your income.
1. Work out your budget
Making a working budget is the bedrock of your operations. A budget specific to your side hustle will help you estimate how much to spend and save to reach your target profit and where you should allocate important resources to more productive activities.
Anthony Martin, founder and CEO of Choice Mutual says, “People tend to get overwhelmed when talking about budget—it’s not as grand as it sounds. Simply put, a budget is your financial guidebook for a year that will help you reach your target profit or savings.”
The good news for busy people juggling a 9-5? Your working budget doesn’t require you to be very specific about your spending—a smart estimate will do. Just take note of the significant costs you intend to spend for the year and set aside a decent amount for emergency expenses.
To start making a budget, you need to identify the following:
- fixed costs
- estimated operational costs
- forecasted revenue
- target savings.
2. Manage your operational expenses carefully
It’s wise to consider the management of operational expenses as a subset of budgeting. When you set a budget, consider projected operational expenses for a certain period and try to work around that expense to reach your target.
Owners who’ve just started managing business expenses may need to consider some or all of the following:
- opening a business bank account
- sticking to your budget
- avoiding impulse business purchases
- taking advantage of expense-tracking apps or software
- identifying variable costs—or costs that vary by production—and manage them
- regular (weekly or monthly) expense and budget reviews
- avoiding incurring interest and late payment charges.
One of the most common sources of unintended expenses is interest and surcharges due to late or non-payment, which is why, when starting, you should do thorough homework on interest-bearing expenses like taxes, mortgages, or car loans. (For more information on managing car loans, check out this factsheet.)
3. Separate your personal from your business bank accounts
So many sole traders and small business owners have fallen prey to the trap of not separating personal and business funds at the start of their operations. Doing so truly is a must. With numerous personal and business transactions that occur within a business day, if your personal and side hustle expenses are drawn from the same account, it’s difficult for you to properly account for cash flow.
Other than the simplification of business accounting, creating a separate business account also helps to:
- accurately compute and file for tax dues
- protect personal assets
- have a clear audit trail
- build business credit
- make your business more trustworthy.
4. Maintain an emergency fund
Consumption, demand, and the market economy are ever-changing and unpredictable, and setting aside an emergency fund—whether it be for personal or business—should never be discounted.
Maintaining an emergency fund will help you and your side hustle stay afloat and pay for fixed costs and other necessary expenses in the event of emergencies or unforeseen expenses. A healthy emergency fund should be able to help you pay your dues for at least six months, including fixed costs like rent, debt repayments, mortgage, and taxes.
Tim White, Founder of Milepro says, “No one ever knows how the economy will move, or how drastic business conditions can change over time. No one knew the pandemic will happen, and it shut down most, if not all businesses around the world and changed the way we operate.” He adds, “While emergency funds don’t solve all your problems, they do provide a safety net to help you get back up over a certain period especially in times of crisis, which is why they’re so important for any business.”
5. Stay insured
We cannot deny the fact that there is a significant financial risk for people without life and health insurance. The cost of medical care for serious illness and accident checks is only ever increasing.
Freelancers who don’t have employer insurance benefits, or digital nomads who are frequent travellers should highly consider getting life and health insurance plans to lessen the financial burden on medical expenses and hospitalisation. Meanwhile, there are many insurance plans available for small businesses like general liability, business income, or property insurance—just to name a few.
With 5 years of copywriting experience, Brooke Webber is a passionate content specialist with a love for storytelling. She believes in the importance of taking control of your finances from a young age. “If there’s anything institutions need to tweak in their educational curriculum, it’s emphasizing the importance of real-life money management at an early age,” she affirms. “Topics like budgeting, taxes, credits, and savings are not just useful in career paths…learning to manage finances as early as high school will help you create a habit of sound practices that you will carry you as you grow old to become financially independent.”