After “side hustling” for the last couple years I now find it difficult to remember a time when I wasn’t mowing lawns, building websites, or writing articles. Though we got by on my my salary, we knew it would take forever to pay down debts and meet our savings goals without adding to our income. I had also recently gone through the process of surviving a layoff at my previous employer, but the experience left me feeling less secure by any form of employment.

Break The Living Paycheck To Paycheck Cycle

Less than a year ago I shared a statistic that nearly half of Americans were living paycheck to paycheck. After the labor market’s free fall since January of this year, I suspect that number is even higher today. Relying on a single source of income has simply become too risky for many families, forcing non-working spouses into the workforce, or forcing a working spouse to take on a part time job.

A side hustle is a sort of part time job, but it typically involves you building something around your current trade. Perhaps you write software for a living and can build websites on the side. If you work in construction, perhaps you could build privacy fences or decks for homeowners in the evenings and on the weekends. The idea is to find something you are already good at and cultivate a little side business around that hustle.

Chances are you can make much more money working a side hustle than working at a part time job for someone else, particularly in a retail environment. The real beauty of a side hustle is that over time it will start to generate a second source of cash flow for your family. No longer will you be absolutely dependent on your full-time job for paying the mortgage, keeping the lights on, and putting food on the table.

But How Much Can I Really Make Working Nights and Weekends?

The answer depends on the hustle you decide to take up, how passionate you are about your idea, and how hard you work to promote it. I’ve seen some people work really hard for six months and then flame out because they were only making  a “few hundred dollars a month.”  They made the mistake of comparing a side hustle to their full-time job.

Think about how many expenses you could cover with just a “few hundred dollars” of extra income each month from a side hustle if you should lose your full time job. It might make the difference in keeping your car to help you find another job, or the difference in keeping power on at your house, or food on the table for your family. It might help you cover the costs of COBRA insurance, other utilities, and maybe even supplement your severance pay to make it last longer.

The point is that by earning income in addition to your regular earnings you are, over time, making a potential layoff less and less of a major financial event. Coupled with a solid emergency fund, you would have little reason to fear losing your job, except that this is a particularly hard time to find another one.

Dedicate Side Hustle Earnings To A Specific Cause

To stay motivated, try dedicating your side hustle earnings, or at least a major portion of it, to a particular cause in your family financial plan. Perhaps you could use all of the earnings to help speed up your debt snowball (this is how we use side hustle earnings). Once you are debt free use the extra income to build savings, and then save for a major purchase such as a down payment on a home, or a new(er) car.

Over the last couple years of working two jobs I have found this strategy helps keep me motivated when I want to throw in the towel. If I simply lumped all the earnings in with my regular income it might get lost in the shuffle, and I might simply be tempted to raise our style of living to match my total income. However, we have made a point to continue to live on my current earnings from my full time job while whittling away debt with side hustle money.

Do you currently have a side hustle, or an idea for starting one?

The following guest post was submitted by Neal Frankle, CFP.  Check out the footer of this post for more information on Neal, and his website.

Lots of people have been laid-off recently.  As a result, they’re looking for any kind of work they can find. I respect people who are willing to do whatever they can to support themselves and their family. But sometimes the “cure” compounds the problem.  Let me explain by way of example.

Mike was a writer and like many in his field, he was laid off several months ago.  Jenny, his wife became the sole support for the family.  Mike looked for work every day but after 4 months still came up empty handed.  The pressure was mounting – financially and emotionally. The couple was facing the real possibility of losing their home.

Finally, Jenny confronted Mike and made it very clear that she expected him to do whatever it took to make money – regardless of what work it was or where he found it.

Mike understood Jenny.  Later that day, he saw a “help wanted” sign at the local book store and applied for a full-time job.  He wanted to do whatever he could to bring home as much money as possible. Mike didn’t get the full-time gig but was offered some hours on the weekend.  That was the best thing that could have happened for Mike and Jenny.

Some questions you might be asking yourself about now might include:

“Does Neal have something against Mike?”  or “Is Neal out of his mind?” or “Does Neal have something against bookstores?”  The answer is “no” to all three questions.

It would have been …..eh……”silly”….. for Mike to take the full-time job and I’ll explain why.

The bookstore was offering him less than $12 per hour. So even if he worked full-time, he would not have earned enough to hold on to the house.  The $12 hour job was a financial placebo for Jenny.  And to make matters worse, he would have been stuck in that job forever because he wouldn’t have the time to look for better opportunities.

Here’s the approach I suggest if you are out of work and facing similar difficulties:

1. Don’t panic.

If you do, you’ll end up making decisions out of fear and ones you’ll likely soon regret. This is the time when you need all your genius brain power.  Cool down.

1. Be rational & get the facts.

How much money does it cost your family to live each month?  Do you have any savings?  What else can you cut to reduce your cost of living? (Hint: if its not food, shelter or medical expenses, it can be cut.)  How much longer can you hold out?  How likely is it that you’ll find work in your own profession?

When Mike and Jenny did this, they concluded that they had enough money to hold on to the house for another 5 months.  They figured that even if Mike took the low-paying job, they would only be able to hold on to the house for 3 additional months.  So they had to decide between:

a)      Taking a chance that Mike would find work in his area of expertise and therefore creating the possibility that they might hold on to their home.  If not, they’d be out in 5 months.

b)      Working at the bookstore and almost surely lose their home in 8 months.

1. Make a decision and execute it. The couple decided that Mike would work on the weekends at the bookstore.  This allowed him to earn some money while at the same time, have the opportunity to look for better paying jobs during the week.  They understood that they had nothing to lose by going this route – and they were right. If Mike doesn’t find a higher paying job in 5 months, he’ll go back to the bookstore or pizza parlor or whatever and take any and all work he can.

When you are facing extreme financial pressure, don’t grasp at the first apparent solution.  Take the time to examine all the facts and try to think outside the box.  You may find that the best solution is not always the most apparent.

Have you ever been in a similar situation?  Do you think that Mike should have taken any job possible?

About the author: Neal Frankle found himself in a financially fragile situation at the age of 17. Both his parents passed away while he was still in high school, leaving behind a small insurance settlement. Neal sought out a financial advisor to help him invest his nest egg so that it would help put him through college. Instead, the advisor charted a self-serving course and was on the verge of burning through the money when Neal realized what was happened and fired him just in time to avoid losing everything.

The experience had a deep impact on Neal and formed in him a lifelong desire to help people learn to make smart financial decisions. Today, with more than twenty-five years of experience in the financial services industry, Neal is an author and avid blogger. Subscribe to his blog at www.wealthpilgrim.com.

Photo courtesy of hyku

Near the end of the first hour of the February 23 Dave Ramsey radio show, a Ford employee (Mark) called in with a dilemma.  Ford has offered him an “entrepreneur” buyout package with a $50,000 lump sum payment plus free health insurance for the next five years.  The caller was running a part-time lawn care business and asked Dave if he should take the money and run, or stick it out in the interest of job security.

Ramsey correctly pointed out that if a company is offering people money to leave there is not much job security left.  Very true.  I would go even further to say that there is no such thing as job security – for any of us.

So the decision before Mark is to take the buy out now and work on his lawn care business (or look for another job), or hang around at Ford and hope he isn’t laid off without a buyout offer down the road – a very real possibility these days.

The Numbers

Mark currently earns $70,000 a year at Ford.  By applying the $50,000 lump sum payment to what he owes, he will be debt free but the house.  The lawn care business grossed $30,000 last year while he and his son ran it part time.

I would advise Mark not to use his entire lump sum to pay down debt; at least not right away.  Instead, I would tell him to pay himself a salary from the $50k for the first eight months or so after leaving Ford.  I would go so far as to automate the process by stashing the lump sum in a high-yield savings account, such as the one offered by ING Direct, and schedule bi-monthly transfers to his primary checking account, as if he was still receiving a paycheck from Ford.

When the lawn care business is consistently bringing enough money in to cover his bills (consistently meaning at least three months) then he can pull the trigger on the lump sum and use what’s left to pay down as much debt as possible, minus an emergency fund.

I worked in the lawn care business some in college, and ran my own business as a side hustle for a short time.  It is the epitome of a cyclical business because during spring and summer things are hopping, and by fall they start to taper off.  Over the winter, it’s hard to land a job doing anything other than removing snow or doing landscape projects (pathways, retaining walls, etc.).  For that reason I would recommend Mark save up a large business emergency fund to cover those down months, or to cover a period of illness or injury.  After all, you cannot take any sick days when you work for yourself.

Would I Take the Buyout?

In a heartbeat!  The only thing stopping me from pursuing a freelance career now is our remaining debt and concerns over health insurance.  If someone offered me a $50,000 check and insurance for five years I take it before the ink dried.  But that’s me.  Some people do not have the same tolerance for risk. Some people do not like all the aspects of running your own show.  The marketing, the bookkeeping, the administration, etc. can be a drag to someone who just wants to get their hands dirty.  But that’s part of being an entrepreneur.  You either have to do it yourself, or hire someone to do it for you.

How would you respond if someone made you the same offer?

Matt asks the following question about preparing for a layoff:

My girlfriend is working the Dave Ramsey baby steps.  She has the $1,000 emergency fund and is now working on knocking down the credit cards.  Her job has laid off about 25% of the workforce and things are not looking much better for them and she might be next if they do another round of lay offs due to the time she has been there.  She is going to get $1,200 or so back on taxes.  Would it be better to pay down debt with that money or to save it?

Since your girlfriend is a Dave Ramsey fan I’ll pass along his advice for this scenario, which I happen to agree with wholeheartedly.  What she is facing is what Ramsey refers to as an impending financial storm–”there are storm clouds on the horizon.”  When we are fortunate enough to see these storms coming it is time to pile up money.

Many employers are reducing jobs in this economic downturn, and I personally think it is a good time to beef up emergency your fund to help survive a layoff.  This is particularly true if your employer is announcing job cuts.

I went through something similar about six years ago at my last employer.  For the first time in their corporate history they announced a significant workforce reduction.  I watched several friends and coworkers come in planning to work on a Thursday morning only to be led out by security carrying all their personal possessions from the office in a cardboard box.  It was a sobering experience, and I knew I could very well be next.

When the layoffs were announced I immediately slowed my debt snowball plan, only paying minimums and storing everything else in an emergency fund.  When the clouds cleared (I found a new job in a new town) I used some of the money in savings to restart my debt snowball plan.  If I had lost my job in the interim we could have lived off of my emergency fund for a few months while continuing to keep debts current.

I hope things improve at your girlfriend’s employer, and she is able to keep her job.  But this is one of those situations where she should prepare for the worst, and hope for the best.

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Last Friday the U.S. Labor Department announced 533,000 people lost their jobs in November.  This figure represents the largest number of layoffs in a single month in some 34 years.  For those fortunate to remain employed the numbers are a worrying statistic. Will we be next to join the growing number of unemployed?

While there are no guarantees, there are a number of things we can do to make ourselves a little more “layoff proof.” Of course, none of this advice will save your job in the event the company you work for goes belly up, or the industry you are in suffers such extreme losses that your employer’s hand is forced.  Having said that, implementing a few of the strategies below should help to lessen the time you are unemployed and help you quickly get back on your feet.

Make Yourself Layoff Proof

Network with others. One of the very best things you can do, even in good times, is keep in touch with colleagues past and present.  Often the best opportunities are revealed by a close contact rather than an online classified ad. Make an effort to keep in touch with former colleagues periodically via email, or even send a snail mail note with your new business card attached. In the event of a layoff you should contact them and let them know you are currently seeking employment.  If you have maintained a good relationship with contacts, and they are well aware of your skill set, they will be happy to keep an ear to the ground in their organization for any openings.

Find ways to save your company money.  In lean times, one of the best things you can do is find ways to save your company money.  Is there a more efficient way to do things?  Can you develop automation to reduce time and costs for laborious tasks?  Suggest ways to make your company more green.  Be frugal with the company’s money when traveling or entertaining clients.

Learn a new skill. Much like what goes on in the interview and selection process, employers are often faced with making similar tough decisions during rounds of layoffs.  They may have two equally qualified, similarly productive employees facing a layoff.  One employee has considerably more experience in a variety of systems, products or processes.  Who would you let go?  Take advantage of opportunities to diversify the roles you can fill for your employer.  Cross-training is an overused term in the corporate world, but it is important to you as an employee because it builds your internal resume with employers.

Be willing to take on new challenge. Similar to adding to your skill set, willingness to take on a new project at work goes a long way.  People have a tendency to get complacent and settle into a comfort zone at the office, turning down new assignments or sandbagging them by appearing uninterested.  Don’t be that person!  If you are, you’ll be at the top of the list during the next round of layoffs.

Develop a side hustle.  This doesn’t have anything to do with your current job, rather it is a hedge against losing your primary job.  By developing a side hustle you can provide a stream of income in the event you lose your job.  The amount may only represent a fraction of your previous full-time earnings, but it might be the difference between keeping food on the table and the lights on.

Last week I had the opportunity to be in downtown Atlanta during mid-day rush. I stopped along a bustling business district to grab a cup of coffee and kill some time. Watching the business crowd hustling along the streets from my warm coffee shop window seat I noticed nearly every passerby had one thing in common. I was reminded of the scene in the movie The Pursuit of Happyness where Will Smith’s character is watching stock brokers move about the streets of San Francisco and he says with a touch of envy, “They all looked so damn happy.”  Except in this case, they all looked “so damn miserable.”

Many were feverishly working a Blackberry, pausing only long enough to look up and avoid running into one another. Most of them were dressed sharp, and getting into and out of nice cars–much nicer cars than I am used to seeing in a smaller town. Several people stopped in to grab a cup of coffee, but one man caught my attention. He ordered the coffee after pausing his Bluetooth headset mid-conversation, putting down his laptop bag on an adjacent table, and returning his Blackberry to its holster. Our eyes met and he shook his head, took a deep breath and let out an audible sigh.  I smiled back and asked, “Tough day?”  He replied, “Every day.”  He paid for his coffee, collected his gear and was off and running again.  As I watched him trotting off into the distance I reflected on how it must feel to be in such a hurry all the time. And at what cost.

Before I had kids I used to think that would be me hustling around some large downtown business district. I wanted to do the daily commute, have an office on the 17th floor, and be part of “the grind.” What a difference ten years makes! None of that appeals to me now. I enjoy the slower pace. I look forward to getting home in the afternoon and spending time with my wife and kids. They fulfill me much more than any job could, regardless of the salary.

Attention College Students:  Choose Wisely

When I have the occasion to be around college students I always like to find out what they are majoring in, and why. The responses are pretty typical. The one thing I have discovered in my own surveying of future professionals is that the students interested in lower-paying career fields seem to be the most confident in their choice of major. I can’t remember ever hearing someone say they always wanted to be a teacher because of the money, or that they were interested in the clergy because of the great pension plan. No, people generally select lower-paying career fields because of a genuine passion for the field. They ignore promises of a higher salary to follow their hearts.

When I started school I entered pre-medicine because I did have a genuine interest in helping people, and because doctors made a lot of money. However, I decided after two and a half years that six more years of school (at least) was not for me, financially or otherwise. I left the College of Science and Math and headed over to the Liberal Arts college determined to change my major to education. I wanted to be a high school football coach.  But, it wasn’t long and I left that major as well after deciding there was no money in teaching and coaching at the high school level.  In both cases I allowed money to heavily influence my decision, instead of simply following my heart.

Parents, Guide Your Kids Towards Their Heart’s Desire, Not Towards Higher Salaries

I credit my mom for helping me finally settle down on a business degree with a specialization in information systems. She recognized that I was drifting a bit, and suggested that I look at something like business or computers, because those skills would always be in demand, and offered a wide range of industries to work in. For instance, I could work in the business or technical side of the medical field, and I could coach youth sports in my spare time (something I did for five seasons for my daughter’s soccer team). In other words, I could find fulfillment outside of my full-time employment.

There are a lucky few that enjoy absolute happiness from their jobs, and make good money doing it. Unfortunately, that is not the norm. Most of us get through our 8:00-5:00 jobs to pay the bills and put food on the tables, and that is fine, as long as we find something that fulfills us outside of work. I have several side hustles that keep me going, and above all I enjoy spending remaining free time with my family. I hope to also add more volunteer activities in the near future, but most of those will be a family affair as well.

If you are reading this and relate to the guy in that coffee shop exhaling deeply under the weight of work life, I would encourage you to evaluate why you are doing what you are doing. Is it for the money? Is it to feed your ego? To pay for stuff? If you downsized your lifestyle a bit, could you afford to downsize your work life, too?  Could you spend more time with your family? Catch a few more soccer games? I hate to borrow a line from Mastercard, but those moments really are “priceless.”

The other day I opened my office door after coming back from running an errand during my lunch break and someone asked about my lights being turned off.  “Do you always turn your lights out when you close your door?”  I laughed and explained it was just habit.  However, as I thought more about it I realized I had brought many of my frugal habits to the office, and that’s not necessarily a bad thing.  Here are a few ways to be a frugal employee, starting with the one that inspired reflection on the topic.

Turn off the lights when leaving an office or conference room.  This is by far the easiest solution to implement.  Just because you are not paying the electric bill it doesn’t mean you cannot take the same energy-saving approach at work as you do at home.  Flipping off a light switch requires very little effort, but it will reduce your company’s energy usage.  Not only is conserving power good for the environment, but things like this have a cumulative effect on decreasing your company’s overhead expenses.  This will help your boss look better by improving the company’s bottom line, and increase your chances for career success.

Try to eliminate printing to hard copy.  This one is easy for me, because if it winds up on my desk in paper format it is likely to get lost in the shuffle.  I would much rather have something electronically stored with an adequate backup system.  A good electronic file system is more searchable and secure than paper copies floating around the office.  It is also more friendly to the environment and cuts down on the overhead costs of stocking reams of paper.  I also like to order my own business cards, rather than take the 1,000 box supply that comes standard with a new job.  When I left my last job I had 996 left.

Repair or upgrade technology when possible.  Often times when a PC is bogging down a simple increase in RAM, a disk cleanup, or a defrag would to the trick.  But impatient employees, and spend-happy IT personnel often just replace the machines with a new one and “retire” the other machine.  Take time to investigate what the real problem is and make small corrections as long as possible to extend hardware’s useful life.  If a replacement is in order try to find ways to save money on your next computer.

Have a pot-luck lunch rather than going out as a team. Pot-luck lunches are like the ultimate brown bag at the office.  Create a theme, such as “Backyard BBQ,” and set up a sign-up sheet for team members to select something to bring.  If some team members aren’t up to cooking a dish ask for plates, forks, cups, drinks, etc.

Spend company money like you spend your own.  This idea assumes that you are a frugal spender at home.  At my last employer I was given a healthy per diem to cover food expenses while on the road, and if entertaining clients or going out as a group with fellow employees I could charge dining expenses to my company credit card.  I wasn’t much fun to go out with!  I didn’t see a need to eat steak and lobster every meal simply because someone else was paying for it.  My typical meals on the road looked like a continental breakfast in the hotel lobby, Subway for lunch, and a grilled chicken salad or similar for dinner.  I typically spent about half my daily food per diem, and rarely used the credit card for allowed entertainment purchases.

Don’t be cheap when it comes to raises.  One mistake frugal managers make is being cheap when it comes to handing out raises.  The people most valuable to an organization should be near the top of the pay scale, and it’s your job as a leader to recognize their value and compensate them accordingly.

What are some other ways to be frugal at the office?