1401: [Part 1] The Side Hustle Emergency Fund by Kevin Ha of Financial Panther on Entrepreneurship

[00:00:01] This is Optimal Work Daily Episode 1401, The Side Hustle Emergency Fund, Part 1 by Kevin Ha of FinancialPanther.com. And I'm your narrator, my name is Dan, and I'm here with you every single day, including weekends and holidays, reading from these great work-related blogs.

[00:00:17] Today I've got a little bit of a longer post, and as I usually do, I'll break it up into two parts for you. I'll do the first half right now, and then hear Part 2 from Kevin tomorrow. So let's get to Part 1 as we start optimizing your life.

[00:00:34] The Side Hustle Emergency Fund, Part 1 by Kevin Ha of FinancialPanther.com One of the best ways to guard against a potential job loss is to create an emergency fund.

[00:00:46] But perhaps an even better thing you can do is to set things up so that if something does happen to your job, you have other jobs still waiting for you. That way, no matter what happens, your income-generating power can never be taken away.

[00:00:57] To do this, I recommend creating what I call a Side Hustle Emergency Fund. A Side Hustle Emergency Fund consists of all the income-generating things you can do outside of your full-time job. If something happens to your day job, rather than having to live on your cash savings,

[00:01:11] you'll be able to fall back on your side hustles and continue to create an income to cover some or all of your expenses.

[00:01:17] What's important is that you've spent time doing them, to the point where you can generate income with your side hustles anytime you want, no ramp-up period needed. I've got a pretty good Side Hustle Emergency Fund that has taken me years to build up.

[00:01:30] It includes hundreds of reviews on Airbnb, dozens of reviews on Rover, over 100 reviews on WAG, and somewhere between 600 and 700 deliveries on Postmates, DoorDash, and Uber Eats, not to mention all of the other sharing economy and gig economy apps I've got sitting on my phone.

[00:01:48] When the time comes, rather than desperately scrambling to figure out how to make ends meet, I can just lean on all of these side hustles that I've spent years building up and learning how to do efficiently.

[00:01:57] In all honesty, I think I could survive on just these side hustles, perhaps indefinitely. Cash in the bank is good to have if you lose your job, but perhaps the best way to guard against a job loss is to have a bunch of backup jobs ready to go.

[00:02:10] In other words, building up a strong Side Hustle Emergency Fund. The Rationale for the Traditional Emergency Fund Before I jump into more details about the Side Hustle Emergency Fund, I want to talk a little bit about the rationale behind the traditional emergency fund advice.

[00:02:27] Most experts will tell you that you should create an emergency fund that can cover 3-6 months of your living expenses. The rationale behind this advice is to have a cash buffer on hand to cover you in the event of an emergency.

[00:02:38] There's nothing wrong with this advice, and indeed I tend to keep a decent emergency fund on hand. What has always bothered me, though, is what the emergency fund is really used for. Most emergencies aren't really emergencies. They're routine maintenance things that should really be planned for in advance.

[00:02:54] Think of things like a broken down car or a busted furnace. These are things that you know will happen one day and that should be planned for accordingly.

[00:03:01] In reality, the primary purpose of the emergency fund is to serve as an income replacement tool in the event of a job loss. If the point of the emergency fund is to serve as a source of income during a job loss,

[00:03:12] then it seems like the better option is to create a different kind of emergency fund entirely, one that isn't based on saving up cash to cover your monthly expenses, but instead is based on building backup ways to cover your monthly expenses.

[00:03:25] That's where the Side Hustle Emergency Fund comes into play. The Side Hustle Emergency Fund has an alternative to the emergency fund. One of the issues I have with the emergency fund is that it works under the assumption

[00:03:36] that during periods of job loss, you'll live solely off your emergency fund. After all, we're taught to think of our emergency fund in terms of monthly expenses. The idea that you'll live solely off your emergency fund has never really made much sense to me.

[00:03:50] If you lose your job, you suddenly have another 40 hours per week to work with that you otherwise didn't have. Sure, some of that time will be spent applying for jobs, but I don't believe for a second that anyone is spending 40 hours per week applying and interviewing for jobs.

[00:04:04] And even if you are, you're unemployed now, so you better be working more than 40 hours per week to make ends meet. So what do you do with all this extra time on your hands? The answer is go out there and start making some money.

[00:04:16] If you can make $100 per day, you're looking at about $3,000 in a month. For a lot of people, that's enough to cover all your expenses. And $100 per day isn't hard to do. At $20 per hour, you're only looking at working 5 hours per day or about 35 hours per week.

[00:04:32] That's probably fewer hours than you're working right now. Obviously, my favorite way to generate income outside of normal work is by taking advantage of sharing economy and gig economy apps.

[00:04:42] You can think of all these sharing economy and gig economy apps as a portfolio of backup jobs for you. Sign up for them before others have done so. Spend some time building yourself up on these different platforms, then leave them on your phone for when you need them.

[00:04:56] If you end up losing your job or have an extended period of job loss, it won't be hard for you to just turn on these apps and make a few thousand bucks a month.

[00:05:03] Instead of having to dig into your cash savings, you'll be able to dig into your side hustles and make ends meet. How to set up your side hustle emergency fund These sharing economy and gig economy apps are a great way to set up a side hustle emergency fund.

[00:05:17] But there's a problem with them too. They still take time to get started. An Airbnb property takes time to build up reviews. Dog sitting on Rover is slow going at the beginning when you have no reviews and no repeat clients.

[00:05:29] Doing deliveries with Postmates, DoorDash, and Uber Eats takes time to sign up for and learn how to do correctly. WAG is a slow process to get started with. It took me a month before I started getting consistent walks.

[00:05:41] When your back is against the wall, you're not going to have time to sit around waiting to get the ball rolling on all of these side gigs. That's why it's worth taking the time to set up these side gigs now when you don't need them.

[00:05:52] That way, when you do need them, you'll already have them on your phone ready to go. Here's how I've set up my side hustle emergency fund over the years. Hear that on tomorrow's episode.

[00:06:06] You just listened to part 1 of the post titled, The Side Hustle Emergency Fund by Kevin Ha of FinancialPanther.com This show is sponsored by BetterHelp. Do you ever find yourself getting caught up in comparison, seeing the successes of others and wishing your life looked the same?

[00:06:22] If so, then you know how difficult it can be to manage these feelings. Therapy can help you focus on what you want instead of what others have, so you can start living your best life. And therapy is for everyone.

[00:06:34] Even if you haven't experienced major trauma, it's a great place to learn positive coping skills, boundary setting and personal empowerment, which can have an amazing impact on both your personal and professional life. If you're thinking of starting therapy, give BetterHelp a try.

[00:06:49] It's entirely online, designed to be convenient, flexible and suited to your schedule. Just fill out a brief questionnaire to get matched with a licensed therapist and switch therapists anytime for no additional charge. Stop comparing and start focusing with BetterHelp.

[00:07:04] Visit BetterHelp.com slash WorkDaily today to get 10% off your first month. That's BetterHelp, H-E-L-P dot com slash WorkDaily. And we want to thank Kevin very much for this post.

[00:07:17] Kevin is an attorney and the blogger behind Financial Panther, which is a blog about personal finance, travel hacking and side hustling using the gig economy. Kevin paid off $87,000 worth of student loans in just two and a half years by choosing not to live like a big shot lawyer.

[00:07:33] Kevin, as you heard in his post, is passionate about earning money using the gig economy, and you can see all the ways he makes his extra income every month in his side hustle reports, which you can see along with other great content at FinancialPanther.com.

[00:07:47] But that does it for today here on OWD, but it does not do it for this episode. We've got part two coming up tomorrow, so hope you'll join me for that, where your optimal life awaits.