By Brad Thomason
I really don’t like the term “side hustle.” I think it’s silly, childish and overused.
Nonetheless, it has, at least for the moment, seemingly become a fixed part of the lexicon. So you know more or less what I’m talking about when I throw it out there, irrespective of how unpleasant I find it to do so.
To be specific, I’m using the term to mean some sort of small business activity which is not intended to be the person’s primary source of income, nor the primary occupier of the person’s time.
The common version is that someone makes $5 at their job, but doesn’t want to live a $5 lifestyle. So they find another way to make money when they are not at work, earn, say $2, and in so doing make it possible to live a $7 lifestyle. Not a difficult thing to understand.
But what if the person engaged in exactly the same activities, but thought of the exercise differently? What if the person considered his/her retirement plan to be the owner of the side hustle? What if the $2 went to fund the nest egg, rather than the higher-dollar lifestyle?
Let’s change away from $5 and $7 to something that’s a bit more to scale. If a person engaged in a side hustle that made $25,000 every year, saved it, and had it grow at a 7% compounding rate, then the result after 20 years would be about $1M.
It’s worth pointing out that even in today’s dollars, a million bucks will fall short of what many people will need to have in order to pull off a successful retirement. And 20 years from now, that million dollars will be worth comparatively even less (due to inflation).
But in a scenario in which having a few million dollars saved up will be necessary to be considered optimal, anything you can do to pick up an extra million here or there is not insignificant.
For too many people, the idea of financial success is based on how much a person has available to spend. The only people who can spend a lot of money on a sustained basis are those who have a lot of money in the first place. So you can understand the logic, at least as far as it goes.
Yet, logic and wisdom are sometimes two different things. For my part, of all of the various things a person could do with a dollar, I’ve always regarded spending it as being among the least interesting of the options.
A simple shift in how you think about an activity that you are already planning to be engaged in can have a big impact on the degree of benefit that you get from the effort, over the long-term. Just decide that your retirement owns the side hustle, and that you need to let your salary be what you use for this year’s spending. After that, the rest will start to take care of itself.
If you have energy and attention span left after making the most of your career opportunities and doing a good job at work, fantastic. Using that surplus capacity in a way that’s productive is a great idea, and the foundation of wealth building.
Just remember that while making the extra money is certainly important, what you do with it after that – spending it or using it to make more – can end up being even more important, still. If you decide the side hustle money is off the table for current consumption, the odds are high that your future self will appreciate both your wisdom and restraint, very much.
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