This article is for informational purposes only and should not be construed as legal or financial advice.
Working your side hustle alongside the 9-to-5 is similar to an origin story for superheroes. Because, when you’re in charge, you’re flexing your skills, and maybe, just maybe, building something awesome. But what about that not-so-super side; in this instance, the debt you may be wrangling with? Fear not, fellow hustler! Here’s how to manage your debt while you channel your inner entrepreneur.
Know Your Debtscape
Before you even get to scaling Mount Debt, the first thing that you need is a map. Gather your statements, emails, or simply log on to your online portals; get a clear picture of your interest rates, minimum payments, and total balances. Is your debt classified under high-interest mounting from credit cards, or possibly student loans? This is the financial landscape that will help you chart your battle plan.
At this juncture, you might also be exploring various methods to manage or consolidate your debt more effectively. This is where the question, “what is an EFA loan?” comes into play. It’s a loan for buying business equipment, potentially with better rates and terms than personal loans or credit cards. Useful for side hustlers needing equipment, it could streamline your debt strategy. Understanding options like EFA loans is key to effective budgeting and debt management for your side hustle.
Please note that loans can have very high interest rates that can be difficult to manage.
Craft a Budget
Budgeting is your superpower. There are a bunch of free budgeting apps and templates around. List all your sources of income, including the main one and projected side hustle money (be realistic about it). Then, list down all expenses. Every latte matters! Once you see where your money goes, you can identify areas to cut back and free up cash to slay those debts.
Choose Your Debt-Fighting Style
Basically, two main approaches come out from methods of debt reduction: debt avalanche and debt snowball. The avalanche is the crushing of the loan offering the highest interest rate, thus saving over time more money but feeling like progressing in a small way.
The snowball approach is more focused on behavior in that it encourages repaying the smallest debt first to get some sort of motivational boost, but it also possibly yields more paid interest overall.
Choose the one that best fits your financial personality and risk tolerance. Take what you like from this smorgasbord and leave the rest. This is the best strategy for the one you will adhere to!
Side Hustle Earnings: To Pay Yourself or To Slay Debt?
That extra cash you’ve earned from your side hustle is kind of like a magical money belt. It’s going to be very tempting to find some way to treat yourself, but I want you to remember that your main goal here is defeating debt. Here’s a possible plan:
Allocate a small percentage (maybe 5-10%) to reward yourself. A little motivation goes a long way.
The rest of the side hustle money should go directly to the debts. First, start with the high-interest debt or choose the most motivating debt for you that you want to pay down with the snowball method.
Hustle Smarter, Not Harder
After all, it’s only 24 hours a day. So, for real streamlining of the finances and hence freeing lots of time to be able to commit to the side hustle without any worry about that, there are the following suggestions:
Set standing automatic transfers for your savings and for paying off your debts. In other words, automate your finances. This way, you will avoid the pitfall of “out of sight, out of mind” and be on track.
The Takeaway
A side hustle can be a powerful tool at chipping away your debt. You will get to know your landscape and be in a position to make a budget, then choose how you are going to pay the debts. One is able to convert his or her side hustle’s earnings into a very mighty weapon to use against the debt. Remember, this is a marathon and not a sprint. So, pace yourself, celebrate those wins, and with determination, see your dreams able to take flight towards financial freedom.