Passion is making a lot of Australians do it. So’s boredom. And then there are those seeking a bit on the side because they want some fun. From virtual assistants and app developers to cake decorators and wedding photographers, thousands of Australians are turning their skills or hobbies into extra income through a ‘side hustle’.
Recent industry research suggests one-in-four Australians already have a side hustle and about 75% of those are pursuing something they are passionate about.
It all sounds fabulous: you do something that you enjoy, you determine how much time and energy you allocate, and you make some dosh doing it.
That’s all great if you have your financial foundations squarely in place, but in my experience, few women do (without seeking out professional advice beforehand). And that concerns me.
Women are wired for security. We thrive when we have clarity and a sense of control. Unfortunately, most of us women don’t have enough for retirement and that saps our confidence in what our future holds.
Overlooking a financial foundation essential
The five financial foundations every woman needs revolve around a spending and investment plan, insurances, estate planning, superannuation and an emergency fund.
In setting up a side hustle, I believe insurances are an area that may be seriously overlooked.
If this is the first time you’ve worked for yourself, you may not be familiar with business insurances and in our litigious society, we need to be covered. Professional indemnity insurance and public liability insurance are two that need to be top of mind. Professional indemnity helps protect against claims clients make for loss caused by professional service or advice.
Public liability is in case a customer is injured, or their property is damaged. It’s also worth checking whether paring back hours of your regular job has an impact on existing income protection insurance.
The ‘emergency fund’ is usually considered as a safety net for unforeseen ‘hiccups’ in life such as a lost job or marriage break-up.
It’s also there for out-of-the-ordinary outlays such as white goods or car breakdowns.
For the side hustle, you may need to some start-up outlays. Is it worth getting a bank loan (think about repayments)? Or can you use some emergency funds now, and top it up when you get going?
Many side hustles are cash-based and, probably, undeclared income. The tax office is wise to this and I hear it’s looking at people who host travellers in their spare rooms (such as Airbnb). Naturally, if you aren’t declaring income you can’t legitimately claim deductions either.
What cost lifestyle
The side-hustle concept sounds brilliant, but is it right for you?
That depends on your personal circumstances and may need some tough questions answered.
Like, is this side hustle actually profitable or is it a distraction?
Could it undermine your long-term financial position by taking away energy and time earning in another way (like a second job or seeking a promotion)?
Five years down the track, if you pursue a side hustle will you be in a position you regret financially, or will you be standing on your own two feet?
Side hustles can provide the best of both worlds. While your day job might be what pays for your ‘now’ and ‘future’, your side hustle might offer you experiences you wouldn’t otherwise be able to access.