Money

Save your Saturdays: Why you shouldn't get a side hustle to pay off debt

Simon Ritzmann | Getty Images

There are two general ways to eliminate debt: Paring down your spending and increasing your income.

One common piece of advice is to start a side hustle to bring in extra cash, whether it's creating your own business or driving for Lyft in your spare time. After all, the more you're bringing in, the more you'll be able to put toward your mountain of debt each month, right?

Not always.

To find out if could make sense for you, first ask yourself the reason you're in debt. Are you paying off your student loans, or have you racked up credit card charges? Did an unexpected illness hit you with a pile of doctors' bills, or are you trying to finance a shiny new car?

If poor spending habits landed you in debt in the first place, earning more money isn't going to teach you to change your habits. It will only provide you with more cash to blow.

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Holly Porter Johnson, co-founder of personal finance blog "Club Thrifty" and co-author of "Zero Down Your Debt: Reclaim Your Income and Build a Life You'll Love," has experience with this. In a recent blog post, she describes an interaction with a friend who wanted to get out debt once and for all and had decided a side hustle was her ticket to freedom.

"You already make plenty of money," Johnson told her via Facebook Messenger. "Your problem is spending. The only way to fix your money problem is to quit spending so much. More money isn't the answer because it will only give you more to spend."

To get to the root of the problem, Johnson suggested her friend begin by tracking her spending, creating a budget and figuring out where her debt was coming from. Once she could see exactly where her paycheck disappeared to every month, she'd be able to decide which expenses could be dropped and which funds redirected toward debt repayment.

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"Chances were good that she would get a much better return on her time using a budget than she would earning money in her spare time," writes Johnson, who has paid off more than $50,000 in debt with her husband. "After all, a penny saved is a penny earned, right?

"If she could cut her spending every month, she would score an automatic raise."

Increasing your income, either through a raise, side hustle or career change, can be a smart way to improve your financial situation. But it's not foolproof, and it certainly doesn't eliminate your bad habits. Plenty of millionaires go broke.

If you want to get out of debt, start with an audit. Are you truly not earning enough, or is there a deeper problem? "If you're like my friend and think you need another job, what you need more than anything else could be an old-fashioned reality check," Johnson writes.

Remember, no personal finance advice is one-size-fits-all. Before you jump into a solution that worked for someone else, evaluate how it will apply to your own situation. After all, "if you're earning plenty of money and wasting it all, more money cannot help you," Johnson says.

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