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As applications for unemployment rise and the future of the economy remains uncertain, you may be wishing you’d started that side gig you’ve been thinking about.
But even as we push past this pandemic and the economy rebalances, you should still consider a shift in how you view income. Since layoffs, industry changes, restructurings and technology advances happen in all types of economies, earning 100% of your income from one place is a risky way to operate.
Financial planners recommend portfolio diversification, venture capitalists invest in multiple start-ups and contractors partner with several clients. The sage advice “don’t put all your eggs in one basket” is popular for a reason. Even job seekers don’t only apply to one position if they’re serious about finding new employment.
So, why do so many professionals continue to rely on one source of income from their employer to cover all of their expenses, lifestyle pursuits and benefits? It’s an outdated model that at one time made more sense than it does today, and frankly one that puts professionals at risk.
Job security is an antiquated term that no longer exists, especially with one employer. It only takes a brief look at history to see all the major companies that have gone under (as a casualty of the Enron/Arthur Andersen scandal, I know it can happen swiftly and cruelly). This isn’t meant to drive fear, but rather to highlight reality. Even when the economy is booming, it only takes a new invention, technology upgrade, acquisition, leadership change or now a virus, to turn your employment status upside down.
The only true source of job security comes from within you. Each of us has the power to continuously build our skills, create a visible professional brand, and cultivate a network of ambassadors (learn how here). And we also have the ability to diversify our income sources so we no longer need to put all of our proverbial eggs into one employer’s payroll basket. Instead, consider a portfolio career.
A portfolio career is essentially where your total income comes from multiple sources and this career structure is becoming increasing popular among professionals who enjoy variety in their work, want to pursue diverse interests or who know the value of aligning with different brands and income streams to reduce financial risk.
Also, as markets shift and companies are increasingly hiring with a focus on projects versus headcount (see Reid Hoffman’s Tour of Duty approach and Josh Bersin’s Pixalated Workforce), having a portfolio career mindset will set you up to align with the future direction of the economy while protecting your assets.
And here’s more good news – there are a variety of ways to create a portfolio career. Here are some ways you can structure it:
- Full-time add-on: While alternative work structures have been growing in popularity for several years, many professionals still work traditional 40-hour plus workweeks due to the nature of common roles, need for benefits, or out of habit. If you have a stable income, this maybe the perfect time to try adding a side gig.
- Anchor role and side gig: Another way to structure your portfolio is to have an anchor role or client, and then to have one or more gigs to fill out the rest of your income portfolio. Depending on how many hours you work in your anchor role, you may be eligible for benefits, which can be a barrier to working independently in the US.
- Multiple part-time roles: If you enjoy the ease of having an employer take care of taxes, payroll, liability and marketing, you may decide that having a few different part-time roles fits your work style. While you may have less control of your hours, schedule or earning potential, there are definite benefits to having a company manage the parts of the business you may be less interested in taking on as an individual.
- Multiple side hustles: Freelancers and independent consultants often have multiple clients or projects that contribute to their total income. While this doesn’t appeal to everyone, if you enjoy variety, solving novel problems, and new challenges, you may thrive in this setting. Having strong marketing skills or a reliable referral network is typically key to a continuous flow of business in this structure.
One of the hardest parts of creating a portfolio career is choosing between the variety of opportunities available. Having a side gig is one of the more popular options where you can tap into your hobbies or creative skills and start a pet-sitting business, sell crafts on Etsy, become a translator, get certified to teach yoga or offer local landscaping services. Another option is building off of your primary job. For example, teachers can tutor college-bound students prepping for SATs, or those working in tech might have a website development side hustle. You can also pursue streams of passive income by creating online courses, doing affiliate marketing, renting out your basement, or investing in property. The really are few limitations to finding something that is marketable and fits your interests and skills (Check out Elana Varon’s The Ultimate Side Hustle and Chris Giullebeau’s Side Hustle: From Idea to Income in 27 Days).
The good news is that it’s not too late. If you’ve ever considered a side gig, this is the perfect time to begin. In addition to building the security of multiple income streams, portfolio careers force you to stretch out of your routines and comfort zone. You’ll be continually building new skills, making new connections and aligning with different brands, all of which help to bulletproof your career when another recession hits.
As you begin, you’ll want to protect yourself financially and legally. Depending on which path you pursue, you should think like a business owner and do your homework. If you’re the type to dive into the Ikea project before laying out the pieces and reading the instructions, you’ll want to spend some time considering the following:
- Check with your employer. Your current employer may have a “moonlighting policy” or if you’re in a sensitive role, you may not be able to participate in certain business activities. Also, if your side hustle is considered a conflict of interest due to the clientele or possible interaction with competitors, it may not be the best course.
- Create a budget. If your side business is seasonal or occasional (e.g. holidays, summers, etc.) you’ll need a plan to manage your money since each month may bring in different amounts of income. Also, it can be exciting to start a business, so be careful about outgoing expenses such as business cards, website development, and other marketing or start-up costs. You want to be sure more money isn’t going out than coming in.
- Consult an accountant. You’ll want to become familiar with filing a Schedule C if needed, and if your business makes money (which is the goal), you may need to pay quarterly taxes since your employer won’t be taking care of this for you. This is fairly straightforward, especially after the first year and your accountant can get you set up to align with local and federal tax laws.
- Protect yourself. Depending on the business you create, consider creating an LLC to separate your personal income from that of the new business. It’s relatively simple and usually just includes filing with your State (nominal annual fee), creating a separate bank account and getting liability insurance. Even with a small business, this is usually worth it in the unlikely event you are sued or have an accident while working on your side gig.
- Set up a payment structure. Getting paid is great, but you need to way to do it reliably. Fortunately, there are many ways to set up online payment, invoices and tracking (see here), so that’s the easy part. The harder part is getting your client to pay. So, be sure to create an official contract that outlines the terms of business and figure out what payment method works best (e.g., half up front, pay per project, etc.).
- Find your marketing niche. If you offer a great product or service, potential customers need to know about it. Identify your “ideal” client and determine where to reach that audience. Usually it’s online, but depending on your business, it might be through local advertisements. Businesses are more credible with a website, so take advantage of the free/low-cost options to bring a level of professionalism to your new gig.
- Avoid MLM (aka, Pyramid schemes). While Multi-Level Marketing businesses are exquisitely pitched to seem like an easy way to start your own gig, there are more horror stories than success stories. Plus, you usually end up spending more than you earn and may lose a few friends along the way.
If the current pandemic has impacted your income or you’re worried it might, then take this as a wake-up call. You have the power to build income security and whether you’re a new graduate or recently retired, a portfolio career can benefit you.
Don’t allow the need to learn something new or take a risk scare you. Starting a side hustle can be incredibly educational, highly lucrative, and often very fun. Usually, the things we fear most are simpler than we imagine and the benefits outweigh the drawbacks. The only way you’ll know is if you try.
Reposted from: Forbes.com