At the beginning of the year, many people have their eyes set on goals. Some of these goals may include increasing your income, starting a dream business, or both if you’re reaching for the stars. Before you get your hands dirty in the sometimes chaotic combination of formal employment and entrepreneurship, here are a few pitfalls to avoid.
Not having a plan for your side hustle income
People get side hustles for different reasons. It could be to help make ends meet, save toward a dream vacation or grow your business to a point where you can quit your job. Catching up on my retirement savings is one reason I decided to start a side hustle.
But you need a plan for that motivation to help make your side gig worthwhile. Think about having goals for your income and a strategy in place to help you achieve those goals.
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For instance, you could divert funds from your side hustle into retirement savings accounts. This is a way to put away more for retirement, depending on how much you make.
The plan I conjured up thanks to my side gig income is increasing my retirement contributions at my full-time job so I’m on track to max out that account this year. I also opened a simplified pension plan, for 2023 to put more money away for retirement.
Eric Nisall, a US-based accountant, suggests having what he calls a “failure fund” if your goal is to eventually transition into full-time entrepreneurship. It’s something he developed when he began the journey of full-time employment and building a business.
“When at my last two firm audits, I was working at building my own business at the same time. I realised, if I’m going to do this, I need to start putting money away so that if I don’t grow, I (won’t) suffer,” he says. Nisall put money he saved from coupons and any extra bucks he made from a raise or overtime into that fund.
Putting your main source of income in jeopardy
Having a nine-to-five job and a side hustle means you’re choosing to work during your free time. For this reason, you want to make sure your side gig is worth your time financially and healthwise. I remember taking on too much freelance work and having to chip away at the work on evenings and weekends. By the time I sat down to calculate my per-hour earnings, I realised I was underpaid. I went back and did research on market rates and was intentional about saying yes only to higher-paid jobs. This meant I didn’t need to do as many side gigs and could earn more money than before.
Overworking can also affect your health, which can put your main source of income at risk, says Nisall. “You gotta make sure that you’re eating, sleeping, taking care of your body and your mind,” he says. “Your mental and physical health are going to play a big part in this whole thing, especially if you’re trying to balance your nine-to-five and growing a business.”
Speaking of putting your main job at risk, consider asking your employer what its policies are around side gigs. When I joined my current place of employment, I was transparent about the side gigs I had. My employer shared rules around the type of side work I could do without violating company policy. If I wasn’t aware of the policies, I could have mistakenly breached them and risked the income that pays my bills.