by Bobby Hoyt, Contributor,
Ah yes, the almighty side hustle. For the past few years, it seems like nearly every personal finance personality (myself included) has been pushing more and more Millennials to start making some of that sweet extra side income. But there’s a reason that side hustles are such popular advice right now — additional income, even if it’s not a ton, can work miracles in your financial life.
Whether it’s something as simple as flipping used furniture for a profit on the weekend, or as complex as starting your own freelance writing business, the extra cash that you bring in from a side gig can be the key to helping you pay off student loans, finally building up an emergency fund, or investing a little more every month.
Here are five reasons that you need to start a side hustle ASAP:
1. You’ll be able to pay off your student loans sooner
Student loans are the worst. When I graduated from college, I had nearly $40,000 of student loans to tackle. While my student loan debt was close to the average Millennial student loan balance — $35,504, according to Experian — many others my age are facing over six-figure balances.
The unfortunate reality about student loans is that they create a drag on your personal and professional life immediately following college. It feels like every decision you make, whether it’s a job change or where you live, has to take your student loan debt into account first.
Now don’t get me wrong — a side hustle that brings in an extra $500 per month (which is the average side hustle income according to Bankrate) isn’t going to make your loans disappear overnight.
But anything you can throw at your loans will help over the long-term. Say your student loan debt matches the Millennial average, and you add an extra $100 to your monthly payment. You would cut your loan term by six years and save over $8,000.
An extra $500 per month towards those same student loans would save you 12 years and over $16,000!
2. You’ll finally be able to build up an emergency savings
Dreading that next vet visit for your dog child? Worried that the little fender bender in the parking lot is going to ruin your finances for the next three months?
Enter the emergency fund. It’s common financial advice these days to have anywhere from 3 to 6 months of living expenses in place. Some financial experts even recommend as much as eight months.
But for many young people, those numbers feel more like a bad joke than an attainable financial goal. After paying the various bills you may have, it’s not always easy to find extra money to stash away for an emergency. Extra income from a side hustle can be easily and automatically diverted to a high-interest savings account each month, and you’ll have a fully-funded emergency fund (and more financial breathing room) in no time.
3. You’ll be able to finally tackle your credit card debt
Here’s a gut-punch of a financial stat: according to USA Today, the average Millennial is carrying $5,453 of credit card debt. That number hurts even more when you consider that the average interest rate is 17.68%. Once you accrue a sizeable amount of credit card debt, it can feel nearly impossible to hack away at the principal amount.
This is where a side hustle can really change your finances, along with decreasing the stress that usually comes along with credit cards. To help you understand what I mean, think about these numbers: Assuming you have the average amount of credit card debt with the average interest rate, adding an extra $500 per month to your payment could help you pay off your card over 100 months faster.
4. You’ll be able to invest more and grow your wealth
Now let’s say you’re in a financial position that allows you to invest regularly (congrats!). One of the great advantages of being a Millennial, outside of having a fine appreciation for avocado toast and craft beverages, is having time for compound interest to work its magic.
Ready for some crazy numbers? An extra $500 per month of side hustle income invested in the market for ten years with an average rate of 7% turns into nearly $83,000!
5. You’ll have more disposable income to have fun with
With all of your other financial obligations, it’s easy to feel guilty for spending cash on extras, from vacations to the vilified latte.
But having a side hustle gives you options. You can allocate all of your extra money towards debt, or you can also save up for the family vacation you’ve put off. You can buy a new watch, a pair of shoes, or take your spouse out for dinner.
Now, don’t go wild and spend all of your side hustle income on extras. Otherwise, you might need another side hustle.
The point is: it’s okay to treat yourself from time to time.
Earning extra money isn’t the key to happiness, but it does give you choices. You can put all of your extra cash towards debt or investing. You can prepare for emergencies and be less likely to add to your debt.
And, who’s to say that you can’t do those things while occasionally splurging on a decent bottle of wine?