This article is submitted to us by Helen Baker, an Australian financial adviser and founder of On Your Own Two Feet, part of the Career Money Life Supplier Community.
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 as boss of their ‘side hustle’.
Recent industry research suggests one in four Australians already have a side hustle and about three out of four 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 having had professional advice beforehand). And that concerns me. Here’s why. 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.
Getting professional advice from a business insurance specialist is wise.
Set up costs
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 whitegoods 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? Maybe you can answer this honestly alone: maybe you could benefit from bouncing the idea off a professional financial adviser.
Side hustles can provide the best of both worlds, like for my friend Rach, who works in disability care and has a travel blog on the side. She’s been doing it about ten years now and has as decent following. She sees it as a way of adding ‘life’ to her days as she experiences places she’d never afford herself, for free, and can envisage keeping on doing this when she retires in a few years. Her day job though is what pays for her ‘now’ and ‘future’.
Another friend, Sonya, has baked birthday cakes afterhours for a couple of years. She’s loved unleashing her creativity and gets great satisfaction in seeing clients happy with her work but it actually costs her money to do it. The price point isn’t sustainable for her as a side hustle.