by Maurie Backman | March 8, 2020
Want to make your side job your main job? Do these things first.
Maybe you started out working a side hustle because you needed money to cover a few unplanned bills. Or maybe you took on that second gig because you wanted to boost your savings account, sock away some money to buy a home, or take a dream vacation.
There are plenty of good reasons to get a side hustle, and in some cases, you may find that the work you do on the side is not only lucrative, but fulfilling. In fact, you may reach a point when you start to think about quitting your main job so you can focus on taking your side hustle full-time. Doing so could make for a more satisfying career, but before you give up your primary source of income and take a chance on your side gig, here are a few important moves to make.
No matter your job, you should always aim to have at least three months of living expenses on hand for emergencies. But if you're planning to take your side hustle full-time, it pays to boost your cash reserves even more. Giving up a steady paycheck is a risky move, and the more money you have in the bank, the easier it will be to grapple with periods when work dries up or clients pay late.
How much should you have in your emergency fund in this scenario? There's no single correct answer, but a solid six months of living expenses is a good start. And if you're not sure whether you'll be able to match your former paycheck by doing your side gig full-time, you may want to sock away enough for more like nine months of bills, especially if you own a home or have dependents who count on you financially.
One benefit of having a full-time job is often having access to a group health plan (this may not be a given, but it's a common workplace benefit that salaried employees are privy to). On the other hand, once you venture out independently, you'll need new health coverage, and that could get expensive.
Before leaving your job, research health insurance costs through HealthCare.gov and see what you can expect to pay. Or explore other options that may be available to you, such as getting on a spouse's plan. Keep in mind that while you may be eligible to retain your former health plan through COBRA for up to 18 months after you leave your job, that option could end up being prohibitively expensive -- and more costly than buying a new plan.
Chances are, the income you earn by doing your side hustle full-time will either be lower than what you're used to earning from your main job (at least initially) or inconsistent. To account for that, comb through your budget and prepare to cut back on some non-essential expenses, like dining out and leisure. At the same time, make sure you expect to make at least enough from your soon-to-be-full-time side hustle to keep a roof over your head and food on the table. If you're not confident it is, wait a bit longer, save more, and then dive in.
If you're thrilled with your side hustle, doing it on a full-time basis could be a rewarding experience. Just make sure you've prepared financially before taking that leap.
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