Side hustlers supplement their income from their job with a secondary source of income, typically through monetizing a talent or through e-commerce. However, should a side hustler be working with a financial advisor as well?

Things have shifted from one generation to the next, and so forth. While most workers above the age of 50 have been able to live off of one source of income, many people in the younger workforce has had to figure out ways to supplement their income due to increasing costs. People in their 50s are also searching for alternative ways to earn extra money as well, considering that the recent years of inflation have substantially increased the costs of their goods and services.

The sad news is the world is nothing like how it used to be. The days where you would be given a pension and a gold watch seem to be long gone, for everyone who works at a private employer. It seems the government is the only one issuing out those benefits nowadays (the pension, without the gold watch). The 2008 crisis made companies tighten their belts in regard to their employee benefits and never relaxed those cost cuts again.

While most people who are older than me have spent most of their lives at one career, the average Millennial changes jobs every 2.75 years, but the job-hopping and demands for a corporate culture that they enjoy aren’t what truly sets them apart from the older workforce: it’s their entrepreneurship.

There is an annual survey conducted by IPSOS that measures entrepreneurial spirit by generation. In 2021, 29% of Generation Z was reported as having a high entrepreneurial spirit, compared to 36% of Millennials, 33% of Generation X, and only 25% of Baby Boomers.

While most people think of entrepreneurship as starting and building your own store, whether it be retail or service-based, Millennials and Gen Z have brought a brand new flair and popularity to a particular style of entrepreneurship that previous generations didn’t: the side hustle.

The side hustle ranges from the person who is trying to build the next Google and Amazon from their garage, or now on their off hours of work, to the person who spends their extra hours in their day driving for Uber or Lyft, and a plethora of different businesses in between that. Some yearn for their side hustles to become their full time projects and replace the income at their job, while others may just be doing their extra hustle on the side, to earn an additional income for bills or for pleasures.

Things to Consider Before Leaving Your 9-to-5 Job for a Side Hustle

Those who dedicate at least 12 hours to their side hustle per week earn a median of $1,112 per month according to Bankrate. That’s a decent chunk of change and may make people inclined to leave their day jobs before their side hustle is ready to fully support them.

If you’ve been a W2 employee and never had your own business or been a 1099 contractor before, you may not understand just how much it costs to provide some of the things that you currently get from your employer.

Firstly, healthcare insurance costs are often subsidized by employers through an employee participation plan, which will not be there if you leave your job. If you’re young and single this may not be a huge deal to you, but for those with a family and kids, it can be extremely important (and expensive).

If you haven’t formalized your side hustle and incorporated it as a company, you may also be leaving yourself open to serious risk. The process of incorporation was created in the West to protect investors from mistakes made by companies. While you may not be taking on any outside investment, if you are performing your side hustle under your own name instead of as an LLC or other type of incorporation, your personal assets may be liable if anyone decides to sue you.

This may not seem like something that you’d be concerned about, but we live in an extremely litigious society. Whether you provide products or services through your side hustle, every side hustler faces the risk that they will be sued, and should protect themselves.

If a lawyer doesn’t get you, the IRS might! Working as an employee is pretty simple from a tax perspective, as your taxes, FICA, Medicare, and state costs are automatically withdrawn from your paycheck. As a solopreneur or 1099 contractor, however, that part is up to you.

Many side hustlers make the mistake of not keeping their personal and business (or side hustle) finances separate. This can provide issues in several different forms, besides finding yourself in the middle of an audit. On the plus side, an LLC is what is considered a “pass-through” entity, which means that if your side hustle loses money (or makes less than it costs you to provide your product or service), you can write those losses off on your personal taxes from your W2 employment at the end of the year.

Another advantage that having a side hustle in addition to a full-time job brings is that many of the things necessary to your W2 employment (cell phone, laptop, gas to get to work, home office) cannot be written off on your personal taxes, but they can be written off as business costs if you’ve formed an LLC.

This makes the 1-2 punch of having both a W2 full-time job and side hustle a pretty sweet deal. You not only maintain the perks of your job (healthcare, regular paycheck) but you can also write many of the necessities of your side hustle off on your business taxes and often even lower those personal taxes. Of course, before you go and start deducting off all of your expenses when it comes to write offs, speaking with a finance professional is going to give you a clearer picture of exactly which write offs are most relevant to your particular side hustle.

What Kind of Team Do Side Hustlers Need Behind Them?

There used to be a saying that when you moved to a new town, the first thing that you needed to do was find a good barber, cab driver, accountant, bartender, and lawyer. Uber has mostly done away with cab drivers, but the rest of that team is still pretty important, especially for a side hustler.

One professional that isn’t included in that mantra is a financial advisor, which I’d suggest is more important these days than most of the others. In a survey conducted by Bankrate, nearly 30% of side hustlers responded that they had picked up an additional gig to build their savings.

In the days of the WWII generation, boomers, and even into some of Generation X, bank accounts were actually a decent way to save money. There were points in those generations’ histories where bank accounts offered up to 10% interest, but post-2008 I don’t know if we’ll ever see those days again.

Even in our current period of history when the Federal Reserve is raising interest rates, the banks that took a serious financial haircut in the 2008 crisis stopped providing anything beyond meager returns to their standard account holders.

With the Fed’s target inflation rate at 2% (although inflation is currently near 7%), any bank account that pays a lower interest rate than inflation is losing you money. The same goes for the tried and true “saving money under the mattress,” which means that the money you worked so hard for is decreasing in value whether it’s sitting in a savings account or a safe in your closet.

A financial advisor can help you put that money to work, in ways that reflect your personal risk profile. Whether you see your side hustle income as a “cherry on top” and are willing to shoot for the moon in terms of investments, or are counting on it to be your retirement nest egg and thusly want it invested more conservatively, a good financial advisor can help you find the sweet spot that will at least outpace inflation and pay you a greater return than a bank account will today.

Why Financial Advisors Are a Great Asset to Side Hustlers 

4.7% of side hustlers report making over $10,000 per month, although the vast majority (over 75%) make less than $500 per month from their side hustle. Just as you are a Subject Matter Expert  in the field in which you’ve chosen to pursue a side hustle, a good financial advisor is a subject matter expert in the science of both managing and making money, and helping you to maintain and grow whatever funds your side hustle brings in.

If a side hustle was started out of a need for additional expenses to be covered, or to improve one’s quality of life, not every penny that is earned should be going towards those efforts. Goals should be established, from paying down debt, living within your means, outlining a plan to break free from a job (if that’s what you choose to do), enter into homeownership, and a plethora of other financial desires for both today and in your future. Most people might not know this, but some financial advisors will help you establish your budget and help you create strategies to pay down debt. They could even help you find opportunities to save significant amounts on taxes, which could help propel you to your goals even quicker than you could do on your own.

When we are looking at our future finances, as with everything in our current information age, the stock markets are extremely dynamic today. Most trading is done algorithmically through computers and supercomputers owned by hedge funds and institutional investors, and the average retail investor doesn’t stand a chance against them.

Do-It-Yourself day traders became nearly as popular as side hustles during and after the 2020 lockdowns, and social media is full of them posting their losses after getting clobbered by the computers and professionals.

This leads the side hustler to a dilemma: putting your money into a bank account will only watch its purchasing power be slowly eaten away as cost of living and inflation increase, but putting it in the market on your own runs the risk of losing it because you don’t have the time to watch the market 24-hours a day.

This is another good area where a good financial advisor can help. By understanding your needs, goals, and risk tolerance, a financial advisor will have access to and knowledge of investments that you’ve probably never heard of. The stock market is not the only investment tool available, and for the conservative investor there are plenty of options out there which are far less risky yet provide modest to excellent returns.

If your side hustle brings in enough money, there are even retirement plans that are specialized for entrepreneurs like the Keogh and SEP-IRA that can be used to replace your employer-sponsored retirement plan should you decide to turn your side hustle into a full-time business someday. In order to create one, however, you will need a good financial advisor to set it up for you.

How Can a Side Hustler Find the Right Financial Advisor for Them?

A good financial advisor will understand the needs and struggles of a side hustler or entrepreneur, as their job is purely entrepreneurial as well. Many financial advisors also have commission or fee-based jobs, so they will know your struggle better than most professionals that you deal with.

It’s important that you find a good advisor who aligns with your values and understands your needs and goals. You also don’t need to be friends with your advisor, but you do want someone that you align and can be friendly with. This can be difficult to find, but thankfully there are tools available today that can help you find the right financial advisor that checks all of your boxes.

Tools like AdvisorCheck.com can help you find what advisors are available in your area, what their backgrounds and specialties are, and how to contact them. Once you meet with a handful of them to see if you align, you can also use AdvisorCheck to go through their backgrounds to ensure there is nothing that you need to be worried about in their past.

Even if you receive a recommendation for a financial advisor from a fellow side hustler, friend or family member, you can use AdvisorCheck to look into their history and background based on their name, location, and/or CRD number.

“A lot of people are intimidated by financial advisors because they think that they could potentially end up costing them a lot of money,” says Leonard Kim of AdvisorCheck. “Financial advisors should be thought of more as assets to you and your side hustle who find opportunities to help you earn more money. While the assumed cost that one could expect to work with an advisor could be astronomical in someone’s mind, the truth is that meeting a financial advisor for the first time is free. An advisor recently spoke to me about potentially opening a retirement account when I inquired about a particular type of insurance. His startup fees? $10,” Leonard continued.

Complications Faced by People Who Don’t Find a Good Financial Advisor

Side hustlers are great at finding new ways to bring in extra money, but they’re not so great at knowing what to do with, or even how to save, that money. They could be spending that money on going out, buying video games, and a plethora of other expenses. Being a financial advisor is a (more than) full-time job in and of itself, and the average retail investor has neither the time, experience, nor background to even know the types of investments that are available to them.

30% of side hustlers reported that finding time for their side hustle was their biggest impediment to starting, and another 90% report foregoing time with friends, family, or leisure activities in order to conduct their entrepreneurial enterprise. Between working a full-time job and conducting a side hustle, there just isn’t much left to pursue a self-education in the dynamic financial and investment markets of today.

As such, many side hustlers know how to make money but don’t know how to save it, the best places to put it, the best accounting tips to prevent paying too much in taxes, or the best ways to grow it. A financial advisor can help with most of those issues and can help you find professionals like CPAs to answer any other questions that you need to make the most out of your extra revenue streams.

The Benefits of Bootstrapping (Keeping Your 9-to-5 and Side Hustle)

81% of six-figure business owners started off as a side hustle, but it takes a long time to get there. Remember, the median revenue for side hustlers who dedicate 12 hours per week is only $1,112 per month. Even if your side hustle is showing promise and growing quickly, the general rule of thumb is to have at least six months of all expenses in the bank before you quit your job to pursue a new career or entrepreneurial venture. Considering how rough our economy has been lately, it may be wise to make an even larger fund than that, in case anything were to go wrong. The job market is tough nowadays and many companies are laying people off, which ultimately means it’s going to be difficult to re-enter into the job force if things take a turn for the worst for your side hustle turned full-time business venture as well.

More people than ever today yearn for financial and corporate freedom. We see our friends or influencers on Instagram traveling the world during the work week and having a grand old time as we slave away at work, but far too many people fall into the trap of cutting their safety nets too early.

There are many economic forces that lie far outside of our control, and can change things in an instant. Take a moment to think of all of the products that were everywhere you looked one moment (fidget spinners, slap bracelets, beanie babies) but now are resigned to the dustbin of history.

Economic indicators are showing that we may be in for a very rough next couple of years, as the current earnings season (Q1 2023) is the worst since 2008. Whether you want your side hustle to become your full-time focus at some point or want it to always remain as merely an additional revenue stream, right now the best policy is to retain whatever safety net you can.

Thinking a Side Hustle is Right for You?

If you already have a side hustle, you probably are well aware that you need a financial advisor as part of your team already. However, if you happened to have stumbled upon this article, you may want to know more about what a side hustle really is?

In the world of internet startups and companies like Google and Amazon being built in people’s garages, a form of startup entrepreneurship began to become popular called bootstrapping. As shown in HBO’s show Silicon Valley, bootstrapping is the practice used by some entrepreneurs who don’t want to raise outside capital to get their business off the ground.

Rather than quitting their 9-to-5 and going “all in” on their new enterprise, bootstrapping entrepreneurs maintain their “day job” while getting their companies going. I’ll cover the benefits of bootstrapping a little bit later, because while similar, bootstrapping and a side hustle aren’t necessarily the same thing.

A side hustle is so named because it is an additional stream of income that people undertake to bring in extra money. Having multiple jobs isn’t necessarily a side hustle. Dictionary.com defines a side hustle as a job or occupation that brings in extra money beyond one’s regular job and main source of income. By definition, a side hustle is a way to bring in some extra money on the side of one’s full-time job.

In today’s world, a side hustle can be many different things. The Uber driver is probably the most widely-recognized side hustle, although many Uber drivers do it full-time. Offering a room or an additional property on Airbnb could be considered a side hustle, but apps aren’t the only foray into side hustles that people take.

Many professionals open up their own side hustles to take advantage of their skills or education. In fact, 43% of households earning at least $80,000 annually report that they have side hustles as opposed to only 37% of households earning under $30,000.

Why Do People Start Side Hustles?

According to Zapier, about one in three Americans have a side hustle, and two-thirds of those side hustles have been started within the last year.

There are a wealth of reasons for so many Americans starting down the path of side hustling. Some don’t want to be left high and dry if their company goes through a period of layoffs, some need the extra income to make ends meet, some just want to be able to afford nicer things, and others are truly entrepreneurial spirits who just want a business that they can call their own.

Two out of three independent workers believe that they are more secure working for themselves than someone else, which drives the point home that the days of working for one employer your entire life are pretty much gone.

This is not without reason, mind you. Many people alive today have experienced both the 2008 financial crisis and the 2020 pandemic lockdowns, each of which drastically transformed our economies and led to massive layoffs. One of the effects of the 2008 crisis was that many people old enough to retire had to remain in their jobs due to their retirement plans taking massive hits during the market crash.

As the older generation stayed in their jobs longer post-2008, fewer positions opened up for the younger generation. This hit Generation X and Millennials hard, as the natural order of job progression and trajectory was gone. Those who graduated college anywhere between 2008 and 2012 faced an extremely tight job market, which very well may be the reason that so many of them took up side hustles (and don’t put any faith in employers).

A side hustle could be a great way to supplement the income that you or your family is already earning to help you attain your goals at a quicker rate, or to even get out of debt. Yet it goes without saying, a financial advisor is going to be essential in guiding you through the process of what to do with all of that excess cash.

Take Control of Your Destiny

We are at a period of immense change in our society on many fronts. If you’ve read the book The Fourth Turning, you understand that all societies go through this sort of rapid change every 80 years or so. In this period, people have lost faith in institutions, are turning away from corporate life as anything more than a paycheck, and more people than ever are looking for a way to control their own destiny.

Financial forces are changing as well, however, and the old ways of “socking money away” in a savings account will see your wealth erode faster than you can accumulate it. Side hustling is a great way to achieve many of these desires, but what good is working hard to save extra money or earn passive income if it’s eaten away in a non-interest bearing account?

If you’ve dedicated your time towards a side hustle to bring in extra money, for whatever reason, take the additional step of finding a good financial advisor to ensure that you’re putting that hard-earned capital in the right place according to your goals and needs.

You don’t have to be a millionaire to have a financial advisor, and as fellow entrepreneurs they will often know the path that you’re traveling better than most. Start a free account at AdvisorCheck.com to get a professional on your side who can help put that money to work so that you can be the person making others jealous on your Instagram feed!

If you like our content, please give us a like and subscribe as it really helps us to continue to provide relevant information.

Written by Robert Lewis

Fact checked by Billy Quirk

Reviewed by KJ Kim

Disclosure

The information provided in this article was written by the research and analysis team at AdvisorCheck.com to help all consumers in their financial journeys, by providing the resources and the insights to help improve one’s financial health, make it through recessionary and inflationary periods of time, and save their earnings to use them towards building a secure financial future. 

Unauthorized reproduction or use of this material is strictly prohibited without prior approval. Any parties interested in content syndication, references, interviews, or PR, please contact our marketing team at marketing@aimranalytics.com

AdvisorCheck.com is an independent data and analytics company founded on the principles of helping to provide transparency, simplicity, and conflict-free information to all consumers. As an independent company providing conflict-free information, Advisorcheck.com does not participate, engage with, or receive funding from any affiliate marketing programs or services. To become a free AdvisorCheck member, visit advisorcheck.com/signup