Greetings, and welcome to the fourteenth edition of Wallet Wellness in 2024 - your midweek source of practical financial tips to elevate your money management skills!

We hope you had a chance to check out the last edition where we explored the 6 psychological tricks scammers use to win your trust. In today’s edition, we will explore some of the reality checks to think about before starting a side hustle.

As always, be sure to check out the Concept Corner below for a deep dive into the money concept of the week.

Let’s dive in!

MONEY254 TIP OF THE WEEK

5 Hidden Risks of Starting a Side Hustle

With salaries stagnating and the cost of living rising, the appeal of a side hustle is understandable. Yet, without proper planning and awareness, a side gig can quickly turn into a financial disaster.

Despite being secondary sources of income, side hustles require the same level of commitment and structure as full-fledged businesses.

It's crucial to recognise the sacrifices and risks involved to avoid potential pitfalls. Here’s a reality check on some of the hidden risks of starting a side hustle if you have been giving it a thought;

1. Financial Instability

While side hustles can provide additional income, they often lack the stability of a full-time job and could easily put a strain on your already limited income. Fluctuating demand, market changes, or unexpected expenses can quickly turn a side gig into a financial burden.

• Why this Matters: The pressure caused by instability induced by a side hustle could result in stress, anxiety and reliance on credit that could impede long-term goals.

• What to Do: Consider strategies such as creating at least one passive income stream and building an emergency fund before venturing into a side hustle requiring significant commitment. Read More.

2. Time and Effort Costs

A side hustle requires time and effort, which can be challenging to manage alongside a full-time job and other responsibilities. It's important to assess if you have the capacity to take on a side hustle without sacrificing your well-being or job performance.

• Burnout and Stress: Underestimating the time and effort required for a side hustle can lead to burnout, stress, strained relationships, and dissatisfaction. Read More.

• Why this Matters: When balancing a side hustle with a full-time job and other commitments, burnout can lead to abandoning the side hustle prematurely, especially if immediate financial gains are not seen.

• What to Do: Consider starting small and set realistic expectations. Communicate openly with loved ones, and remain adaptable to changing circumstances. Read More.

3. Legal and Regulatory Compliance

Depending on its nature, operating a side hustle, even on a small scale, can come with legal and regulatory compliances such as business registration, permits, licenses, insurance, intellectual property protection, data protection, health and safety regulations, and tax obligations that are often overlooked.

• Fines and Penalties: Non-compliance with legal and tax obligations in a side hustle, such as failure to register the business or report income, can result in fines, penalties, or legal actions by regulatory authorities. Read More.

• Why this Matters: This can lead to financial strain and damage to the reputation of the side hustle or the individual running it. It may also limit opportunities for expansion or partnerships.

• What to Do: Thoroughly research and understand the requirements, seek professional advice, keep accurate records, stay informed about regulatory changes, plan ahead, and be transparent in your dealings. Read More.

4. Competition 

The market for side hustles can be competitive, especially in popular niches. It's essential to differentiate your product or service and find ways to stand out from competitors to gain a foothold and attract customers.

• Frustration and Disappointment: Without a clear strategy to differentiate their work, individuals starting a side hustle may struggle to stand out and generate sufficient income. This can lead to frustration and disappointment, potentially discouraging people from pursuing their entrepreneurial aspirations. Read More.

• What to Do: Take time to understand the market to ensure you are offering a unique product or service and provide exceptional customer service. Stay agile to adapt to changing needs and explore collaboration opportunities. Read On.

5. Impact on Primary Income

A side hustle, if not well managed, poses a risk of decreased productivity, missed deadlines, or conflicts arising from balancing the demands of the side hustle with those of your main job.  

• Job Loss or Significant Career Setbacks: If a side hustle begins to impact your performance at your main job, it could lead to conflicts with your employer, missed opportunities for advancement, or even termination of employment. This can have long-term consequences on your career and financial stability.

• What to Do: To manage conflicts of interest between a side hustle and a full-time job, prioritize effective time management, set clear boundaries, communicate openly with your employer, delegate when possible, and regularly evaluate the impact of your side hustle on your main job and personal life. Learn More.

Embarking on a side hustle journey can be both exhilarating and challenging. While the allure of extra income and skill development is enticing, it's crucial to approach side hustles with eyes wide open. Remember, it's okay to start small, make mistakes, and learn along the way. 

By staying committed, managing your time effectively, and seeking support from mentors and advisors, you can turn your side hustle into a rewarding and fulfilling experience. So, go ahead, chase your dreams, and embrace the adventure with a smile! Learn More.

CONCEPT CORNER

The Art of the ‘Side Hustle’

If you have worked in formal employment, you probably have witnessed the pressure to try out one or more side hustles. But as you may already know, it is not always a walk in the park. Many people quickly realise that the nicely named 'side hustle' is an act of entrepreneurship and to make money, it will take more than wanting money. In this article, we demystify the side hustle.

Money and Me

“Do I really Need to Own a Business?”

“Not everyone who starts a biashara or side hustle gets to ride off into the sunset while sipping on some overpriced wine. Simply put, not everyone is meant to start a business. And this is my experience…” Read On.

MONEY254 #MONEYTOK

Taking a Paycut to Work Upcountry

We are witnessing a reversal of the urban-rural migration that characterised the 2010s. The skyrocketing cost of living is forcing many employed Kenyans out of big cities - many even willing to take up to 30% pay cut to work in their home counties. In today’s #MoneyTok, we are asking, is a Ksh50,000 salary in a rural town worth more than Ksh100,000 in Nairobi? Watch the Video.

@money254hq

Is Ksh50K Salary Upcountry Worth More than Ksh100k in Nairobi? #Money254 #Moneytok #Nairobi #Salary #Comparison #Personalfinance #financetiktok #Fyp

That's it for the fourteenth Wallet Wellness edition of 2024! We hope these financial tips have added some energy to your mid-week hustle. Stay tuned for more practical insights in our next edition of "Wallet Wellness" next week and watch out for Money Weekly on your inbox this Friday.

Also, don’t forget to download the Money254 App on the Google Play Store, and remember that we can help you compare over 300 loans, savings accounts, current accounts, and more if you’re thinking about your next product.

Cheers to your wallet's well-being!

Money254 editorial team.