Many of us who've primarily enjoyed regular salaried employment throughout our careers may have come to believe our paychecks will always be there. Maybe we're in no danger of being fired for performance-related issues, and we've settled into a routine of covering expenses, making minimum debt payments, and perhaps even setting a little aside each month.
But this balancing act leaves you completely reliant on that paycheck. If you unexpectedly lose your job, as, unfortunately, millions of Americans have during the pandemic, you'll suddenly find yourself scrambling for cash to cover expenses. Just 41 percent of Americans have $1,000 or more in savings. And if you're part of the 59% that don't, your next blown tire could blow up your budget.
Insurance against job loss
Your employer does pay into your state's unemployment compensation fund. From this fund, unemployed workers can draw on unemployment insurance (UI), a source of income you can rely on until you find a new job. But as we've seen during the pandemic, receiving your first UI check isn't necessarily a quick process. That income is also less than what you were making, as well as taxable and temporary.
But what if you had other checks coming in? No, not from cashing in on your 401k. What if you had other sources of income that could help tide you over until you found your next job? And what if that income was substantial enough that you were in no rush to find another job?
Building a side hustle or two
If you had income from other sources, you'd have considerably less financial stress. You wouldn't have to rush to take the first job offered, especially one that isn't the right fit, just to keep the lights on. And while you're still working, that extra income could help you achieve your long-term financial goals more quickly.
That's why it's crucial to build a secondary income stream. It could be a part-time, hourly gig. But if you, like many working people, can't commit to working a set schedule of 16 to 20 hours, after your full-time job, given your full-time job and family responsibilities, take advantage of the gig economy. Use one of the many app-based platforms, like Uber or Instacart, to make money when you have the time.
Make Your Money Work For You
Or you can take the time to start that business you've always dreamed of. Taking baby steps now can make it easier to turn your passion product into a money-making enterprise when you need to. And even if you never saw yourself as a business owner, try your hand at monetizing a hobby. Enjoy writing? Offer your services as a freelancer to companies online. If you enjoy clothes shopping, consider retail arbitrage — where you buy discounted items and sell them at a mark-up.
The important thing is to start now when you don't need the money. When you've been laid off, you'll be scrambling to get started. Delays in an Uber application process or in finding customers for your business can be financially catastrophic. Building a second income now can be a great hedge against layoffs. It can also help you learn a range of new entrepreneurial skills to build and grow wealth. Don't just rely on your bi-weekly paycheck to make ends meet. Get started on your first or next side hustle today!