Are we in a recession yet?
A couple of weeks ago, the answer to that question was no. Despite double-digit unemployment numbers and an unprecedented slowdown in economic activity, the U.S. economy didn’t meet the requirements of an official recession because the decline hadn’t lasted long enough.
Now, however, it’s official. Our economic decline has lasted more than three months, which officially puts us in recession territory.
The good news is that the recession is expected to be short-lived as our economy has already begun to bounce back. The bad news is that the recovery may be uneven, and a second wave of this virus is a high probability for the fall.
So, what can you do to shore up your finances?
We’ve talked in the past about surviving a recession by controlling spending, having ample cash, and looking for new ways to earn money.
These three methods should all be employed together, but the third, finding new ways to earn money, is what will buffer you from future recessions no matter how long they last.
Past newsletters have given you lots of ideas on side hustles that can build your wealth. But, if you haven’t started on any of them, there could be something holding you back. Often, it’s a fear of failure or having incorrect assumptions that keep you stuck in the same place.
So, if you haven’t started a side business or found an alternative income stream (other than your investment portfolio), then this message is for you.
We’re going to break down three myths about earning income on the side and give you the keys to success when you venture out on your own.
Three Side Income Myths
- Trading Time for Money Is Bad
We hear this one a lot, and on the surface, it makes sense. Yes, if you take on a second job at Home Depot selling potted trees and you’re making minimum wage, then trading time for money is not going to grow your wealth.
However, if you offer consulting services or speaking appearances, you can potentially earn thousands of dollars per hour for your time.
The important thing here to remember is perspective. Trading time for money isn’t terrible if you’re being compensated well, and you enjoy what you’re doing.
- Passive Income Requires Work Upfront
When people try to sell you on the idea of passive income opportunities, they’ll often tell you that you can make money while you sleep. And who wouldn’t want to do to that?
And yes, it’s true. When you have a passive income stream, you do earn money even when you’re not working, and you don’t have to be awake to see your bank account grow.
What doesn’t get talked about nearly enough is how much work it takes to set up a passive income stream. Writing a book to earn royalties, starting a blog for affiliate income, or building an e-commerce store to sell a product can take hundreds (or thousands of hours). And, once you’re done with the heavy lifting portion of the project, you might still need to put in some work.
The point is, though, that once you’ve done the bulk of the labor (the book is published, the blog is written, or the store is built), you can begin to earn without having to work full-time. Also, at the end of the process, you have an asset that can continue to grow your wealth.
The book can turn into a series, the blog can add more income streams, and the e-commerce store can continue to grow until you decide to sell it.
- If You’re on the Right Path, You Won’t Want to Quit
Even though if you’re doing what you love, it won’t feel like work, that doesn’t mean there aren’t going to be challenging days. A tech problem, a staffing problem, getting sick, or having a series of mishaps can make you want to throw in the towel.
To stay motivated, remember what your goals are and remind yourself why you’re putting in all this effort. Maybe your motivation is to provide a future for your children or grandchildren. Maybe you’ve decided to put in the work now so that you can travel the world in five years.
If you quit at the first signs of struggle, you won’t achieve any of that. By having a vision of what you want out of your side projects, on both a personal and financial level, it will be easier to persevere.
The Bottom Line: You likely already know this, but it bears repeating. If you are relying on a single source of income, you are extremely vulnerable, especially right now. Your job could go away, your business could be shut down by a pandemic, and your investment portfolio could see rapid declines.
Even if your side gig doesn’t immediately earn money, it’s worth putting effort into it now. By choosing something you’re passionate about doing, you can avoid it feeling like “work,” and you’ll be insulating yourself from the next inevitable recession.
