[This is part of the Side Business Series: From Extra Income to Full-Time Business]
With job instability and economic uncertainty at all time highs, everyone should start a side business. Finding time for a side hustle might be difficult, but the rewards are so worth it.
The key is to create a side business around one of your interests. I built a side business around a hobby. It didn’t feel like a second job because I was passionate about what I was doing. And, I will not lie: the second income rocked!
My goal with this article is to share the rewards I have received from my side business. In the next article of this side business series, I will share the specifics of my side business.
For now, let me share with you the rich rewards I have received from my side hustle.
Multiple Career Acts
I was tempted to begin my list stressing the value of earning extra income, but that is such an obvious benefit. So, instead, I want to highlight what I believe is the most important benefit: multiple career acts.
I first learned the phrase “career acts” from one of my favorite authors, Paula Caligiuri, Ph.D. Caligiuri defines career acts as “simultaneous and stimulating profitable activities composed of what people (who enjoy what they do) engage in for a living.”
Over the last two decades, there has been a huge change in the workforce. Employers no longer believe they owe a duty to protect the jobs of their employees. This shift has not been one-sided: employees are a lot less loyal to their companies. Unfortunately, the risk of economic catastrophe is much great for employees under this new paradigm than for employers.
After this social contract was terminated, employees have been told that the best way to protect themselves from this new world order is to focus on their careers and skills, and thereby maintain marketability so that they can get jobs with other employers if they get laid off.
I think this is a losing battle for most people.
I posit that the best way to survive this instability is by creating multiple streams of income or having multiple career acts.
Each career act can be its own side business.
I put multiple career acts as the number one benefit of starting a side business. The traditional career model taught by our schools, families and societies says that employees should myopically focus on their primary occupation to the detriment of all other activities. But, I argue that building multiple streams of income where each stream of income fits your interests, talents and life goals creates a healthy career.
I promise you: you will be happier in your work and life if you create multiple career acts that stimulate you. And, a side business is a great income stream to build.
The second biggest benefit is the extra income that your side business will throw off.
While I probably would have continued to pursue the activities surrounding my side business without the extra income, I am not going to lie: the extra income generated from my side business is awesome.
Here are some of the ways I have used my extra income:
- Paying down my law school debt
- Saving a sizeable (but still underfunded) emergency fund
- Taking my wife to France for our 10th wedding anniversary
- Investing in my side business so that it generates even more extra income
The best thing about side business income is that it is disposable income. My day job pays all my expenses so anything I earn in my side business is extra disposable income. My wife and I worry much less about money now.
Extra Income Tip: Here is one tip I have for you; treat yourself from time-to-time with your side business income. I make sure to reward myself by buying something I normally wouldn’t buy for myself, like my Macbook Pro.
Since I entered the workforce in 2000, I have seen several disturbing trends:
- Anyone can be laid off at any time.
- Most layoffs come without any advanced notice.
- People who are laid off face the risk of economic ruin.
- Older people are more at risk of layoff than their younger, cheaper colleagues.
- Older people have a lot harder time finding comparable work after being laid off.
I don’t want this to be me or you.
The best way to protect yourself is by diversifying your income—start a side business.
It has been hammered into us that we need to diversify our investments. But, few talk about the need to diversify our income. It is foolish to rely exclusively on this income source.
A Word of Caution: A side business can prevent you from collecting unemployment benefits. There was an article a few years ago about a part-time blogger who was refused unemployment benefits because her blog generated $100 a month in adsense income.
While this is serious, don’t let this keep you from starting a business. The income I now generate from my side business is greater than what I could collect from unemployment.
Discovery of New Passions, Skills and Talents
This is how a side business can really add fulfillment to your life. I have discovered so many new passions, skills and talents that I never knew I had.
Through my side business activities, I have discovered my love for,
- Blogging (if you are interested, here are some of my favorite bloggers: John Falchetto, Gini Dietrich, Marcus Sheridan, Mark Schaefer, and Srini Rao)
- Podcasting (here are some of my favorite podcasters: Cliff Ravenscraft, John Jantsch, Andrew Warner, and David Siteman Garland)
- Coaching (I would like to thank Pam Slim and Justin Lukasavige for teaching me about this world of coaching)
- Search engine optimization
- Internet marketing (Thanks Ed Dale!)
Uncovering these new passions has added so much fulfillment in my life. I am still interested in the law, but after practicing something for eleven years it can get routine. However, I have incorporated many of my new passions into my legal interest. I have been able to help aspiring entrepreneurs to create awesome businesses. And, I have started studying marketing, advertising and eCommerce law.
The main point I am trying to make here is that my life is much more interesting today thanks to building a side business that fits my interests and talents.
Tax Benefits of Business Ownership
The last side business benefit that I want to mention is the tax benefits from starting a business. The U.S. Tax Code highly favors business owners.
There are two main tax benefits that I want to highlight today. I will write a full article on the tax benefits of owning your own business later in this series.
The two major tax benefits are,
- Business expense tax deductions
- SEP-IRA–Simplified Employee Pension Individual Retirement Account
Business Tax Deductions
The tax code allows business owners to deduct business expenses from their taxable income. This is huge benefit for side business owners.
Here are some of the common tax deductions available to side business owners:
- Computers (Did I mention my Macbook Pro and iPad?)
- Computer software (Photoshop, MS Word, Pages, Keynote, etc.)
- Office furniture
- Business related trips and meals
- Auto expenses
- Magazine subscriptions
Another tax advantage available to business owners is a SEP account. Most of you are familiar with IRAs and 401ks, but I bet a lot of you haven’t heard about SEPs. SEPs allow business owners to defer paying taxes on their income and control their investments in investment accounts of their choosing.
Shortly after starting my side business, I opened a SEP account with Vanguard. This has now become one of my primary investment vehicles. I still contribute to my 401K, but only up to my company’s 401k match. The rest of my retirement savings goes into my SEP.
I will write an entire article on SEP accounts later in this series.
I hope that this article has shown you how great having a side business can be. If you have a side business, please share with us the benefits you have received from your business in the comments below.
[Image by www.stuckincustoms.com]