Monthly Archives: July 2009

When To Give Up A Side Hustle

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In response to last week’s post regarding side hustles, and why everyone should have one, Amiyrah of 4 Hats and Frugal pointed me to one of her recent posts along with the following question:

Up until a few weeks ago, I also had a side hustle, and have pretty much always had one since I was 14. What I am wondering is, what are your thoughts on having to let go of side hustles? When life gets complicated or when the money your making doesn’t make up for the extra stress you are attaining?

It’s a great question, and one that I’ve pondered myself at times over the last couple years of maintaining side hustle in one form or another. For those who have never tried to maintain a second career, I can tell you that it is exhausting. Keeping up with your regular job AND a side hustle requires a lot of sacrifice, and sometimes that sacrifice far outweighs the benefits gained.

I certainly don’t have all the answers, but I like to think of side hustles as a temporary endeavor. Understand when I say temporary, I simply mean not permanent. You could work at your hustle for a few months, or a few years. But at some point something will have to give.

If you are like me and hustling to get out of debt, then debt freedom may be the point where you decide to step back and reevaluate things. With all debts eliminated, chances are you can afford to give up the side hustle and return to a “normal” work schedule, enjoying more free time when not engaged with your primary job.

If you are hustling to put a child through school, or save up for a down payment on a home, or some other finite financial goal, then chances are your end point is also fairly well defined. However, if you are working two jobs so one spouse can stay home with the kids, or so you can realize your dream of early retirement, or some other long-term financial goal, the hustle could become a permanent fixture in your life. And that’s the point when it could become a drain.

Side hustles are great for boosting your income, but they come with one major risk:  lifestyle inflation. As cash flow increases so does the temptation to increase spending. Pretty soon you start counting earnings from your part time career as part of your regular income. You can now afford that bigger house, and can easily make another car payment thanks to your side job. Be careful. This is a spending trap, and one that if you fall victim to, can lead to years of pain and financial suffering.

While working a side hustle do your best to keep spending flat. Throw your extra income at your goal, and only that goal, while resisting the temptation to use that money towards lifestyle spending. Once your goal is achieved, it will be much easier to evaluate your new financial picture, decide the things that are most important at that stage in your life, and make a clean break from your side hustle as Amiyrah appears to have done.

Always strive for balance in your financial life. Do not allow earning money to completely consume you, even if you are doing so for a noble goal. Debt can always be paid back a little slower, and savings can be accumulated a little longer. However, you only get one shot at maintaining your health and well-being, and your relationship with loved ones.

Sales Tax Holidays Another Spending Trap

Posted on by  at  6:00 am
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Back to school shopping is just around the corner.  That means upcoming sales tax holidays for many states. It is mostly a non-event in our household, as I despise large crowds packed into malls, and would gladly pay 7% more in sales tax to shop on another weekend.

Still, for many of you sales tax holidays are second only to Black Friday in their opportunities to spend money. Funny the things that suddenly look affordable minus sales tax, when just a month or two ago they were way out of reach. Just imagine the number of people out there charging up balances on store credit cards at 24% interest rates to save 7% on sales tax.

Don’t get me wrong; I’m not totally against the idea of a sales tax holiday. Quite the opposite. I look forward to just about every opportunity to eliminate a tax from our lives. However, I consider it a spending trap because days like this often lead normally frugal people to lose their frugal minds and shop like crazy just to “save on taxes.” Spending $100 to save $7.00 rarely makes sense, unless you were going to spend the $100 anyway, and then it might.

Of course, it would be unfair for me to pick on sales tax holidays. There are plenty of spending traps put down for us these days. Many first-time homebuyers feel compelled to run out and a buy a home before they are financially ready because of the first-time homebuyers tax credit being offered. Others feel the tug of car fever driving them to car lots to trade in their clunkers for cash when their clunkers were getting them from A to B just fine.

All of these traps are designed with one purpose in mind: to increase spending. In some cases these programs offer excellent ways to save money. However, if you are not prepared to spend the money wisely you should not be tempted to spend it at all, regardless of the incentives to do so.

Since most states are offering sales tax holidays towards the end of this month and early August you still have a little time to prepare, assuming you are brave enough to fight the crowds. Start planning a back-to-school budget and set aside a little from each paycheck between now and your state’s tax holiday in a cash envelope. When the sales tax holiday is in effect you’ll have a cash budget to shop with, minimizing the risk of going over budget or resorting to credit cards to fund the shopping spree.

Will we participate in the sales tax holiday? Probably not. The only thing I might be interested in buying around that time would be a new computer, as ours is over eight years-old now. I’ve upgraded a few components over the years, but the processor and hard drive space is laughable compared to current models. Computers are the one thing that don’t usually fit into my, “if it ain’t broke, why replace it” mantra. If you want to stay fairly current, you have to upgrade every couple years at a minimum. As you can see, we are far from “current.”

By waiting until sales tax holiday weekend I could save up to $70 on a $1,000 computer purchase (I won’t spend that much, but to keep the math simple I rounded up). Retailers also typically plan sales around such holidays which could mean even higher savings.

It’s worth noting that this year’s recession, combined with severe budget shortfalls, have caused many states to cancel or postpone sales tax holidays. Be sure to check a current 2009 Sales Tax Holiday Schedule for your state before shopping.

Planning To Declare Financial Independence

Posted on by  at  6:00 am
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On this day marking the celebration of our nation’s independence, I thought it fitting that thoughts of our own financial independence were near the front of my mind. I just wrapped up my second book in as many weeks, Work Less, Live More: The Way to Semi-Retirement. It was a great read, and I particularly enjoyed it because the author shared many actionable steps, portfolio recommendations and real-world techniques to move towards financial independence. Other works often come up short on providing anything beyond theory and “pie-in-the-sky” projections.

The most important lesson I learned (or had reinforced) from the book is the idea that I just need to get started. Many of us are paralyzed by the investment choices so we sit around and do nothing. Suddenly, we’re fifty-five years old with barely anything in savings, and twenty years left on our mortgage. That puts you about as far away from financial independence as you could get!

Here I sit at almost 32 years-old, and not a lot of savings to show. But, we’ve had some big wins in the last several months. We’ve knocked out a lot of debt, paid off our car, and rebuilt our emergency fund after a family emergency took its toll. In the next year we’ll be debt free, except the mortgage, and can then really begin to focus on our dream of a semi-retirement before traditional retirement age.

Maybe I’ll continue writing in semi-retirement; maybe I’ll find some other side hustle I enjoy. Regardless, in 15-20 years I’d like to find myself doing more meaningful with my days than working in an office. I’d like to teach, mentor, and coach young people. I’d like to do more volunteer work. I’d like to do many of the things I’ve had to forgo to this point just to keep the family checkbook in the black. When we reach financial independence we will have the freedom to use our life energy for something more worthwhile to use than earning a paycheck.

In the coming weeks and months I’ll begin to share more about my strategy for achieving financial independence. Some big decisions will have to be made regarding our future plans. Will we invest in taxable accounts, or tax-advantaged retirement accounts (or both)? Will we go with mutual funds, high-dividend stocks, bonds, cash, or some combination?  How will real estate play into our plans? What will we do for health insurance? How does our kids attending college affect our plans?

Lots to sort out, but fortunately we have plenty of time. Our number one priority is becoming debt free. In the mean time we continue to save in retirement accounts, but soon we may add other investments to the mix. Of course, I’ll be seeking your input along the way as well. From the comments, I know many of you are now enjoying a semi-retired lifestyle and I deeply appreciate your input, as do other readers.

While this post was about “financial independence,” it’s worth mentioning on Independence Day that many men and women around the globe are putting their lives on the line for our independence. Many others have come before them and paid the ultimate sacrifice. Take a moment today to remember those who serve their country, and their families. Without their sacrifices the idea of financial independence would be merely a dream.

Prescription Drug Costs

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Chances are you’ve read multiple articles about saving money on prescription drugs.  Use generics, try the mail-order route on recurring prescriptions, consider splitting pills (accurately), and be sure to run the costs through your health insurance and then your FSA.  It is all good advice, much of which you’ve heard before.

In the scheme of healthcare costs, prescription drugs are generally considered one of the “good” expenses in healthcare.  It is cheaper to treat your high blood pressure than be affected by the consequences of it, for example.  Still, within the vast realm of prescription drugs, there are many variations of choices as well as costs.  Based on reader questions and forum posts at www.healthharbor.com, we’ve compiled a list of three questions that have been asked often as of late.  Below are the questions, along with some thoughts around each issue.

1)  How much do I save by using generics instead of brand name drugs? It varies greatly, and it shouldn’t be a financial decision alone.  Some patients find that they respond differently to a generic than a brand name drug, although it could be the placebo effect at work.  In general you’ll likely save at least 50% on generic drugs, and it isn’t rare to see savings of up to 80%, so it is definitely worth considering anytime it is an option.  In addition, a consumer-friendly trend has emerged in the past couple years – the deep discounting of certain generics by major pharmacy chains to as little as $4 per month – which may make the savings even greater.  The useful interactive Discount Generic Drug Radar at http://www.healthharbor.com/DiscountDrugRadar.php can help point you in the direction of the nearest discount generics in your area.

2)  If I have a prescription for a brand name drug, can my pharmacist prescribe me the generic equivalent instead? No.  Only if your doctor, on the prescription, wrote something to the effect of “Generic OK” can a generic be substituted for the brand name.  A pharmacist has to be very literal when they fill the prescription.   That is why it is so important that you have the discussion about generic alternatives when you are talking directly with your doctor.

3)  Can my doctor make me come in for an office visit just to get a new prescription of a recurring medicine I take? Yes.  Doctor’s have a responsibility to make sure your prescription is still the right one for your condition, given changes in your health, other drug interactions, or other factors.  If you have a prescription that enables you to get three refills, you should be able to get your three refills without another visit.  However, when that prescription is done and you need another month’s supply, the doctor has every right (and a responsibility, actually) to see you to make sure the prescription is still calibrated to your situation.

This guest column is from Paul at www.healthharbor.com.  HealthHarbor is a site devoted to helping people be smarter consumers of healthcare.  It provides ideas and guidance on saving money on healthcare, interactive tools for controlling healthcare costs, and hosts an online community devoted to healthcare spending topics.

Weekly Roundup: When You Were A Kid Edition

Posted on by  at  6:00 am
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Short on time again this week as my company goes through its fiscal year end. It’s a busy time, which makes the days go by fast, but I’m finding out I don’t do 12-hour days as well as I used to! When not working I did manage to find a few great articles around the web, including an intriguing video.

I occasionally share small business (or side hustle, as I like to call them) ideas here with you, and found the following video inspiring. Remember when you were a kid? What did you want to be when you grew up? What got in your way? Yourself? It’s never too late to chase your dreams. And it is never too late for the spirit and ingenuity of the American entrepreneur to right this ship. It’s not up to the government; it’s up to us.

Video: Entrepreneurs Can Change the World

The Roundup

We’re In Debt: $150,679 To Be Exact. I admire the writer’s honesty by revealing their debt load, and after reading the post felt anxious for them. I, too, remember being deep in debt, thought not quite that bad. Still, anyone who has lived with significant amounts of debt knows the pressure it adds to every area of your life.   I tell people it’s like being pinned to the ocean floor by a two-ton anchor.  (@ Your Money Relationship)

The Pros and Cons of Joining a Local Food Co-Op. We never got around to starting our garden this year because of family issues and a hectic work schedule. Because of that we are missing our summer vegetables we enjoyed last year. This article presents some pros and cons of joining a co-op, something that can provide lots of local, fresh food, but at a cost. (@ Generation X Finance)

How to Combat Dread and Welcome Adventure Into Our Lives.  This is one I really need to work on. I tend to dread anything out of my routine, rather than looking at these new experiences as “adventures.” (@ My Super-Charged Life)

See How Far Your Salary Goes in Another City. Think you are paying too much for your home, or not earning enough to survive in your hometown? Check out this article which links to a CNNMoney.com tool where you can compare the cost of living in two cities. (@ Life Hacker)

Spending Moratorium Starts Wednesday. I really wanted to join Bargain Babe on this one, but unfortunately July snuck up on me too quickly. It will be interesting following along to see just how many days she can go without spending and money, save the few essentials she mentions in the post. (@ Bargain Babe)

The Cheap Garbage Bag Dilemma. Spending a lot money on garbage bags is hard for me to do. I mean, after all we are simply using them to collect stuff to throw away. But my experiences with cheap bags ripping half way to the garbage cans, or leaking and leaving a trail of rotten food juices all the way through the kitchen and garage. Nope, I’ll pay for my name-brand garbage bags. (@ The Simple Dollar)

The Basics Behind a Budget That Works.  A budget that works in the best kind of budget, which means your options are fairly open.  We budget for major household expenses with every paycheck, but keep things pretty loose when it comes to tracking smaller expenses. (@ Simple Mom)

What Your Moving Company Won’t Tell You Until You Sign the Paperwork. About five years ago we completed an out-of-town move. After making a number of trips ourselves with boxes and small furniture, movers came in to haul away the big stuff. They loaded up the truck on afternoon, and the next morning the stuff was being moved into our new house. I couldn’t help but wonder where my stuff stayed overnight, and I can related to the worries over movers holding your stuff hostage. (@ My Two Dollars)