Everyone knows that I think side hustles are great tools for increasing your income and getting in a better place financially.
But that doesn’t mean I suggest going into a side hustle blind, nor do I think it is necessarily the easiest way to get into a better place financially.
One thing I talk about in my new book Hustle Away Debt is what to do before starting a side hustle. After all, if you can make a few adjustments to your current lifestyle you may immediately increase your cash flow, giving you additional funds to pay down debt, save money, or invest.
So before you start a side hustle be sure to do these 5 things:
1) Do salary research
One of the biggest mistakes employees make is not doing salary research. Some of you reading this may even be wondering “what do you mean by ‘salary research’? How do you even do it?”
You probably already are well aware that the internet has made information widely available. Salary data is no different. Decades ago you had to share information with coworkers you trust. Today you can share data – anonymously – with millions of people.
Being able to justify a raise based on market data is a huge benefit of working in the 21st century. In a previous post I gave a full explanation of how to find and compare salary data.
I’ve heard many success stories on this topic. Just a couple weeks ago a family friend used this advice and received a raise. We are going out to dinner to celebrate.
2) Look at job openings for next-level job
Many bloggers who focus on side hustle income assume that people don’t enjoy their 9-5 income and are trying to find “something else” that could potentially become their full-time job. This is sometimes the case, but certainly not always. This sort of thinking makes people blind to the fact that getting a promotion at work – or leaving their company for a better job – could have a much bigger impact on their finances than a side hustle. Plus, you typically work the same hours, but for more pay.
One tip I give people is to always be looking at job openings, even if they have no intention of leaving their current job in the near future. In fact, this is the best time to be looking at job openings.
Looking at job openings helps you know what hiring managers are looking for at the next level. You can then adjust what you focus on over the next 3, 6, 9 months to align with developing the skills or gaining the experiences that hiring managers are looking for.
What does this have to do with side hustles? Well, you just might realize that you are qualified for a next-level job right now.
3) Review your spending habits
While I do tend to focus more on increasing income than cutting spending, I think there are many people out there who have a spending problem and not an income problem (or both). Cutting expenses down by $100, $200, or even $500 a month can sometimes be much easier than gaining extra money through a side hustle.
The first step to understanding your spending is usually the most difficult – actually keeping track of your spending. Let’s face it: tracking your spending isn’t fun! Most people have multiple credit and debit cards they use and consolidating it all can be annoying.
While I don’t think I will ever “enjoy” the process of tracking my spending, I’ve been doing it for nearly four years now and it’s had a huge impact on my finances. The toughest part is getting started. I suggest using our free automated budget spreadsheet to get started.
Once you have a couple months of spending information you can start to look at it with a critical eye. There may be some spending categories – like eating out at restaurants – that are much higher than you anticipated. Making adjustments and cutting expenses can give an immediate boost to your finances.
4) Review student loan payback options
As I mention in my book Hustle Away Debt, my wife and I graduated with over $100k of undergrad student loans – and she still had grad school to go! With the average debt of approximately $35k for a class of 2015 grad who graduates with debt, student loan payments can feel crushing.
It’s always preferable to at least make the minimum student loan payment, but if you literally have no breathing room it can make sense to adjust your repayment terms. One of the most popular options is income-based repayment, where your student loan payment cannot be higher than a certain percentage of your income.
If you have student loan debt that has a really high interest rate it might make sense to refinance your student loans through a service like SoFi. Erin put together a great post explaining when and how to consolidate or refinance student loans.
5) Analyze your debt
Student loans aren’t the only debt people are carrying. There are hundreds of millions of dollars in outstanding credit card debt and personal loans, not to mention auto and mortgage debt.
I’m a numbers guy and when it comes to debt I’m always very focused on the interest rate attached to it. My mortgage is locked in at an interest rate of less than 4%. There is no way I’m going to make extra payments on that debt.
If you have credit card debt, though, you likely have an interest rate of around 20%. That’s a lot of money going out the window each month that could be going towards actually lowering your overall debt amount. Check out all my suggestions for what to do if you are in credit card debt.
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Don’t get me wrong, side hustles can have a huge impact on your finances even if you go through this entire list. In fact, I’ve gone through this list and continue to revisit things, especially the career-related items. I’ve increased my income at my 9-5 and cut unnecessary spending, which has allowed my side hustle to have an even bigger impact on my finances.
Which of the things on this list have you given a try?
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I probably could improve on tracking our spending. For now, we are trying to be “gazelle-intense” about paying off our debt, so we just spend as little as possible. Most of our monthly expenses are paid on one credit card with a rewards programs that is paid off in full before the due date – EVERY TIME. So, that statement gives us a pretty good idea of our monthly expenses.
It sounds like you might not gain quite as much value from tracking your expenses, but I know many people who have no idea what they are spending and would be shocked if they actually tracked it closely.
I am totally with you David! Side hustles are an awesome way to make extra money but sometimes you can make (or save extra money) easier just by doing some research and figuring out what your options are. I always tell clients to exhaust the opportunities in the main hustle before pursuing side hustles.
That’s great advice for your clients, Shannon! I think the only exception would be if your main job requires more and more hours and you reach burnout with no time for anything else in life. But for many people getting promoted does not mean more work (at least in terms of hours worked). I know many entry-level employees who work long hours, which is the nature of finance/accounting.
Is your blog your side hustle or do you currently have more on the go? Just being nosey :-) that’s great news about your family friend getting a raise just by asking!
Always happy to answer questions : ) My blog is my main side hustle and has been for three years. Around the same time the blog started taking more and more of my time I also had some Spreadsheet consulting opportunities. Once the book opportunity came up that also took up a lot of my time. Over the past year I’ve done some consulting for companies about social media and marketing to millennials and I would like to do more of that. Ironically I have a spreadsheet side hustle I will be working on this weekend as well! Finally…I have an audio product I am developing with a friend. Totally different than anything I’ve done, but I think it has a good chance of success.
That’s cool – good work! Good luck with the audio product too!
Thanks! It’s totally different than any of my other side hustles, but I think my experience with my other side hustles will help me make it successful.
This is all good advice. I just wish people would take a closer look at their spending before they tried to pick up work on the side. I know so many people who spend all they earn who think they would be fine if they just earned more. But earning more won’t really help if you don’t manage your money well.
Excellent point. I know people who are like that as well. They think that earning more will solve their money problems but once they earn more they also start spending more so their money and debt problems still don’t go away.
Great points! It’s also (imo) a lot easier to do some cost-cutting versus finding a way to make extra money. If you do both you are going to do very well for yourself!
Solid guidance. As with anything that involves time and money, the ROI must be known. Leaping blindly into something with the belief that just working hard and being dogged in the pursuit of income will yield good results provides a great opportunity for disappointment.
Great point, James. It’s important to be realistic about it. This comes into play more so when we start talking about quick money versus long-tail side hustles. Long-tail side hustles may never make money, but they could also potentially make a lot of money or give you a better quality of life. No perfect answer!
Good list. I think I’ve covered most of my bases with these. Working in government the salary info is pretty much set and everyone knows more or less how much you make. I’m probably up to the point that I am ready to do a side hustle…and I’ve been using it as an excuse but it’s tough to side hustle when you have a little one. But I know that I can find some time to do some side hustles.
I totally hear you, Andrew. I personally can’t imagine side hustling while you have children. I know for a fact it would look much different. It’s not a bad excuse but I do see some parents who use it as an excuse that literally allows them to never even consider trying something.
Could not agree more. Side hustles can be a great way to bring in extra income – which can do many things in your life. However, I think we all can miss the forest for the trees, so to speak and not realize there are things we can do to improve the situation we’re in at the moment. We’ve done all of these and come back to revisit a number of them on some sort of basis to stay on top of things.
Revisiting them is huge! If I had just done the salary exercise once and never did it again, I would have missed out on thousands and thousands of dollars in the form of moving up the ranks at work.
Not doing salary research before starting a position is one of the worst decisions I have ever made.
So critical to ensure your future success.
Man, I wish this stuff was available when I was in my 20’s. Well, not all would fit.
I was a teacher, and there wasn’t much to moving up. All the districts nearby paid pretty much the same. Advancing the ladder meant back to school, so I jumped in and made more money with Side Hustles.
I had no student debt, so that wasn’t an issue. My teaching gig was paying the bills, but I wanted to learn to fly. Thus, my side hustles.
I made wiring harnesses and wooden bed floor kits for antique Chevy trucks and I also built Vacuum Forming molds for a plastic forming company.
When there’s a goal, there’s a way to meet it.
I’m all for Hustling, even in my retirement. Yeah, I’m not a Young Adult anymore, but I sure like David’s message!
I wish I had found a David back when I was younger.