“Things may come to those who wait, but only the things left by those who hustle.”
— Abraham Lincoln

“My hustle is nonstop. I never stop hustling.”
— Young Jeezy

When we were growing up, our grandparents taught us some very basic personal finance maxims:

  • Spend less than you earn
  • Save up some money for a rainy day
  • When we were growing up, milk cost a nickel, and you had to milk the cow yourself
  • And we went uphill to school, both ways, 10 miles, in 3 feet of snow

Yet, despite “knowing” these maxims, 80% of Americans have debts, 36% have nothing saved for retirement, and 64% of Americans don’t have enough cash on hand to cover an unexpected $1,000 expense.

So, if you didn’t follow Grandma’s advice, you’re not alone.

Of course, much like our grandparents’ advice, most personal financial advice today still revolves around cutting back on expenses.

That’s fine if you have a lot of fat to cut. Buying a new pair of Jimmy Choo shoes or Beats by Dre headphones every month? You have room to cut back on expenses.

But, in reality, for all of our financial failings, most of us are actually reasonably thrifty with our day-to-day spending. Sure, we could find an extra $5 or $10 here or there, and over time, that adds up, but it’s not the big game-changer that can really get us propelled towards our goals.

After all, the average college graduate today is earning $45,478 coming straight out of school. With an average student loan debt burden of $28,950, there’s not a whole lot of wiggle room in the early years to cut back on expenses.

Furthermore, most of us follow the same time-worn (and stress-worn) path of getting new furniture for our new digs, buying professional outfits to wear to work, and upgrading the hoopties that we drove in school (assuming we had cars in college at all). If we were broke college students, we’re not going to suddenly be swimming in cash to pay for all of these “requirements” of adult life, so out comes the credit card and the auto loan paperwork.

While not advisable, it’s easily understandable to see how a young adult could be saddled with a significant amount of debt and not have a bunch of income to throw at the problem. Cutting expenses probably won’t get them where they need to be as quickly as they’d like (or as quickly as Suze Orman would tell them is possible).

I liken the cutting expenses mantra to something an old high school friend of mine used to say:

“I’d rather be too cold than too hot. You can always put on more clothes, but you can only take off so many.”

It’s the same with cutting expenses—you can only cut expenses so far before you’re living under a bridge.

So, if the “Excess Cash = Income – Expenses” equation has limited flexibility on the expenses side, the other lever to pull is, of course, increasing your income.

In a recent Money Mastermind podcast, I talked about how to go about getting a raise at work. That’s certainly one way to push on the income lever, but it’s not the only way. The other way is to do odd jobs, build an entrepreneurial venture, get products on Etsy, and the like – what I and many others call a “side hustle”. Get out there, create something of value, and get paid for it, during the time that you’d otherwise be sitting around watching Kardashian reruns.

But just how much does that side hustle really help you? What if you committed to doing a side hustle for a few years just to get your financial feet underneath you?

Let’s look at a hypothetical couple, Bill and Jane. They have a daughter, Jill, and they live in Virginia.

Bill is 25 years old. He works at The Day Job, where he makes $50,000 a year and expects annual raises that match inflation. Bill is eligible for a 401(k) plan which matches 50% of the first 8% that he contributes, and he contributes enough to get the full match.

Employment information entry screen by online financial planner myFinancialAnswers
Employment information entry screen by roboadvisor myFinancialAnswers

Jane is 24 years old. She works at The Other Day Job, where she has the same compensation package as Bill does, and makes the same contributions to her 401(k) plan.

Spouse Employment Information Entry Screen by online financial planner myFinancialAnswers
Spouse Employment Information Entry Screen by roboadvisor myFinancialAnswers

They want to retire when Bill is 65 and Jane is 64.

Retirement Age Entry Screen by Roboadvisor myFinancialAnswers

Together, they have 2 student loans. Bill’s remaining balance is $75,000, at 4.5% interest with 8 years remaining. His monthly payment is $931.74.

Student Loan Entry Screen by online financial planner myFinancialAnswers
Student Loan Entry Screen by Roboadvisor myFinancialAnswers

Jane’s is for $75,000 at 4.5% interest with 9 years remaining, for a monthly payment of $845.82.

Student Loan Entry Screen 2 by online financial planner myFinancialAnswers
Student Loan Entry Screen 2 by Roboadvisor myFinancialAnswers

They both have cars and car loans to go with them.

Bill has 2 ½ years left and a balance of $20,000 on his 5% car loan, giving him a monthly payment of $710.59.

Auto Loan Entry Screen by online financial planner myFinancialAnswers
Auto Loan Entry Screen by Roboadvisor myFinancialAnswers

Jane has 3 ½ years left on her loan of $20,000 at a 5% interest rate, making her payment $520.06.

Auto Loan Entry Screen 2 by Roboadvisor myFinancialAnswers
Auto Loan Entry Screen 2 by Roboadvisor myFinancialAnswers

Together, they have a Visa and carry a $15,000 balance at a 9.9% interest rate, meaning their minimum monthly payment is $197.40.

Credit Card Entry Screen by online financial planner myFinancialAnswers
Credit Card Entry Screen by Roboadvisor myFinancialAnswers

They have done a decent job of getting started on their retirement accounts. Bill has $15,000 in his 401(k), Jane has $10,000 in hers, and they’ve saved another $1,000 in a 529 plan for their daughter Jill.

Balance Sheet by online financial planner myFinancialAnswers
Balance Sheet by Roboadvisor myFinancialAnswers

Jill is 1 year old, and they want to put her through 4 years of college when she’s 18.

Children Information Entry Screen by online financial planner myFinancialAnswers
Children Information Entry Screen by Roboadvisor myFinancialAnswers

They’re willing to pay 50% of her education, and they don’t want to take out parent loans (like PLUS loans) to provide that assistance.

College Funding Screen by online financial planner myFinancialAnswers
College Funding Screen by Roboadvisor myFinancialAnswers

Besides what they’re paying on debt and their retirement plan contributions, they spend what they earn each month.

Budget Reporting Screen by online financial planner myFinancialAnswers
Budget Reporting Screen by Roboadvisor myFinancialAnswers

They realize that they’re living pretty frugally, and when they retire, they will want to expand their lifestyle some.

Retirement Expenses Screen by online financial planner myFinancialAnswers
Retirement Expenses Screen by Roboadvisor myFinancialAnswers

Unfortunately, when we run their situation through the myFinancialAnswers calculation engine, we see that they will fall well short of what they need in retirement, running out of money around when Bill is 74.

Nest Egg at Retirement by Online Financial Planner myFinancialAnswers
Nest Egg at Retirement by Roboadvisor myFinancialAnswers

In order to meet the saving requirements to allow them to retire when Bill turns 65, they would need to save about 21% of their gross income annually (assuming their expenses increase with inflation). But as we’ve discussed before, with their debt burdens being what they are, Bill and Jane really don’t have room in the budget to get to this level of saving right now.

Action Center Retirement Recommendation by Online Financial Planner myFinancialAnswers
Action Center Retirement Recommendation by Online Financial Advisor myFinancialAnswers

What is That Side Hustle Worth to You?

But if they make an extra $1,000 a month for 5 years…

Future Income, Future Expenses, and Other Income screen by online financial planner myFinancialAnswers
Future Income, Future Expenses, and Other Income screen by roboadvisor myFinancialAnswers

After rerunning the myFinancialAnswers calculation engine, we see a much better outcome!

Nest Egg at Retirement by online financial planner myFinancialAnswers
Nest Egg at Retirement by roboadvisor myFinancialAnswers

As you can see from the above, this couple will now have more saved up than they need, meaning that they could potentially retire a little earlier, or have an even higher standard of living than they are planning on in retirement. Alternatively, they could even bump up their current standard of living just a tad – though that’s not necessarily what I’d recommend. In these sorts of situations, I personally always opt for the “retire earlier” route, as my opinion is that reaching financial independence should be the first financial goal you reach for in these sequences. You can always make other decisions and tradeoffs later, if necessary — but don’t use up your financial buffer before it ever really materializes.

If you’re in a tight financial situation, there should be no job or “side hustle” that’s beneath you. Look at the man who paid off $52,000 in student loan debt in 18 months by delivering pizza. You can drive for Uber. You can do data entry. The possibilities are endless if you’re willing to put the hustle into the phrase “side hustle.”

And, as we have seen above, the payoff can be well worth the effort you put into your side hustle. Want to know how much your side hustle will help you out? Check out myFinancialAnswers, and see for yourself!

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