Diversifying your revenue streams is one of the most important things that you can do
to improve your Financial Health.
And as it turns out there are far more benefits to creating a side hustle than just the monetary
factors and in this video, I'm going to show you the math behind why that is as well as
discuss some of my own experiences with my side hustle and how it changed my life.
Today I’m going to be going over the top 3 reasons why I think you need to have a side-hustle.
Hey everyone Daniel here and welcome to Next Level Life a channel where you can learn about
Investing, debt, retirement, and many other general financial education videos because
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The first reason that I think everyone should have some sort of side-hustle is the added
security that it provides.
Most of us only have one source of income and that would be the salary from our jobs
and that's all fine and good you can create a financially successful life based off of
just that however there are so many unknowns when it comes to the job market and the larger
economy as a whole.
What happens to you when the economy tanks if your company decides that it needs to lay
people off in order to stay afloat?
Unless you’ve had enough time to set your financial affairs in order already you’re
likely to experience a sudden and drastic change in your standard of living until you
either find another job or your company is able to bring you back and having a side-hustle
can help to limit that drop off in lifestyle or even prevent the drop off from happening
in the first place depending on how well it is doing for you.
Even something as small as $500 or $1,000 a month can help delay the need to dip into
your emergency fund, or heaven help us, credit cards while you try to regain your previous
income.
The second reason that I think everyone should have a side-hustle is that it can help speed
up your path to financial independence.
Now you'll see a lot of stuff online about creating passive sources of income and there's
nothing wrong with that method, I'm a fan myself, but that's not the only way to create
more sources of income.
Some people get a second job, some people deliver pizzas on the weekend, some people
go onto Craigslist and look at the free section and then go grab some of that stuff and sell
it on Craigslist or eBay or Amazon for a profit, some people do a similar Thing by going to
Dollar stores and buying something for less than it's worth and then turning around and
selling it at market value, others hire property managers and get housing or apartments that
they can then rent out at a profit without having the inconvenience of having to fix
toilets.
And it may not be as much as you're making at your job but it's a nice secondary source
of income which can help you pay down your debts faster or invest more early on when
you still have a lot of time for that money to compound on itself as well as mathematically
make it easier for you to retire early if you wish to.
So there are tons of ways that you can create multiple streams of Revenue it really just
comes down to what one works best with your skill set and your goals as well as the lifestyle
you want to lead.
And I'm not going to go over all the various ways that you can go about making this side
income in this video that's not what I want to focus on here maybe in the future video
but not today, today I just want to focus on the math behind why finding something that
will allow you to get another Revenue stream is important.
Now I'm not going to focus too much on the debt payoff end of things in this video because
I think it's obvious to all of us that if you're throwing more money at your debts you're
going to pay them off faster.
The thing that I'm more interested in is what this does mathematically for those who wish
to retire early.
Because one of the biggest roadblocks to early retirement for a lot of people is that they
feel they need to have a million dollars or $3 million dollars or some huge chunk of money
set aside in order to retire early, you see this brought up a lot with people like Suze
Orman.
And while it's certainly going to help if you have a lot of extra money because it gives
you more wiggle room in retirement it's not necessarily required.
Now don't get me wrong I'm not saying don't invest, I'm not saying don't try to get a
large sum of money before retiring because you definitely should still do that, but I
am saying that there are other things you can do to supplement those Investments and
maybe speed up your time to be able to retire early if you wish to.
For those who have been watching my videos for a long time, you'll probably remember
me talking about the 4% rule or the safe withdrawal rate which is a rule of thumb that many early
retiree hopefuls use to get a good guesstimate of how much they would need to invest in order
to retire early.
The too long didn't watch version is, in general, you need roughly 25 times your annual expenses
in order to be able to retire and have a reasonable chance of not running out of money.
Now some people say 25 times is not enough so some people use a 3% safe withdrawal rate
and say you have to have 33 times your annual expenses but again it's a rule of thumb to
give us a ballpark estimate, to give us something to shoot for but everyone's situation is going
to be a little different.
However, in general, it's a good ballpark estimate and it's the one I'm going to be
using for the math in this video because I have to use something otherwise the equations
never get started.
So say if you wanted to live on $3,000 a month in retirement or $36,000 a year which if you
are debt-free is definitely doable especially considering that you're going to have to get
pretty good at controlling your expenses if you ever hope to retire early.
$36,000 a year times 25 is $900,000, so that's our starting goal but what happens if we had
income coming in during retirement?
Let's say you started a blog on building your own business where you show people how you
built your business what tools you used how to get through the ups and downs particularly
in the early stages and all that sort of stuff and you started using ads, affiliate marketing
as well as selling an ebook on your blog to generate some sort of income.
Over the course of your first year, you begin to build a following and find that by the
end of the year you're generating $1,000 a month on average from your blog through the
sale of your books ads and affiliate marketing.
You enjoy writing on the blog and figure you could continue doing this fairly easily when
you retire which means that in addition to your Investments you're actually bringing
in $1,000 a month on average in retirement if not more because the business might continue
to grow.
If we’re being honest, $1,000 a month is not that much money to make on a business,
assuming you are consistently providing good value to your customers, especially if you
keep your costs low and have been working on it for years which at that point they would
have been.
But $1,000 a month is $12,000 a year.
$12,000 a year in income during retirement means that that's $12,000 a year you don't
have to take out of your Investments.
Meaning that your Investments don't actually need to cover those particular expenses.
They only need to cover the extra $2,000 a month or $24,000 a year that are not covered
by your business.
$24,000 a year x 25 is $600,000.
So generating this side income has saved you from the need to invest an extra $300,000
for retirement.
And if you do the math on the difference it can really be an eye-opening experience.
Say if someone had already managed to invest $600,000 in retirement, but didn’t have
any side income.
They have done it over the long-haul investing roughly $1,000 a month every month for a little
over 20 years at an average rate of return of 8%.
At this rate, they would have to continue working for nearly another 4.5 years to reach
the $900,000 mark.
However, if they started working on a side hustle from the beginning, generating roughly
$1,000 per month and threw that into their investments then instead of retiring in 24.5
years with roughly $900,000 they would be financially independent in about 13 years
and 9 months with $600,000 which means they are capable of leaving their jobs almost 11
years earlier than they would’ve without the side-income.
Now, of course, they could continue working until they reach $900,000 shortly after the
17-year mark, but even then it still a savings of 7 to 7.5 years.
Either way, it's quite a lot of time that you’re saving.
The third reason that I think everyone should have a side-hustle is that it has the potential
to radically change your life.
For the record, this is what happened to me.
As many of my long-time viewers will know my dad used to talk to me about finance quite
a bit.
He was always interested in the subject matter and realized how important it was to properly
educate his kids about finances.
I also realized that schools didn’t really teach us about money, heck even the financial
classes I took while in college didn’t teach me much of anything about handling my own
personal finances.
And even though my dad died while I was young and before he really had enough time to implement
many of the ideas he taught me about I could see even then how impactful it could be on
someone’s life to be properly educated about finances just by where I was in my life at
the time.
Even something as seemingly small in the grand scheme of things like finding out a way to
graduate from college debt-free so that you aren’t putting yourself in such a large
hole so early in life can make a huge difference.
So I looked at where my life was then and the trajectory I was on and a desire began
growing within me to pass on what my dad taught me to as many other people as I possibly could
because if I could just get 1 person, just one to really get it, to get something to
click inside them with money then that is an entire life that gets changed for the better
and that would make it all worthwhile.
It shifted my entire life plan, it helped me to decide to try out semi-retirement at
24 so that I could have more time to make these videos and work with people individually
to achieve the same level of freedom and choice that I’ve been lucky enough to experience.
So I hope that between me and others like me you are able to take the first, second,
or last steps on your journey to reaching your dream life.
So those are the top 3 reasons, at least according to me, why I think everyone should look into
getting a side-hustle.
But that'll do it for me today once again if you enjoyed this video be sure to subscribe
and hit that Bell next to my name so that you'll be notified of all my future uploads.
I generally upload every single Monday, and if you have a friend that would be interested
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out there and start our own Financial revolution.