- More than half of Americans report having had a side gig at some point, according to a recent survey by SunTrust Banks, and 81% of people with side gigs are interested in making them full-time jobs.
- If you want to make your side hustle a full-time job, there are several things to consider, such as managing the loss of your employer benefits and saving up enough to comfortably make the leap.
- Even though you might be losing your employer's contribution to a retirement savings account, it's still just as important to save.
When Lauren Schaefer started planning weddings, she never imagined it would become a full-time job.
The 31-year-old worked in the events management industry for 10 years before she started her own company. When her friends started getting married in 2015, she helped run their ceremonies as her wedding gifts.
In 2016, she was working on an event in New York when the manager of the venue asked if he could refer her to others — and whether she had a website. So she made one — and the referrals started rolling in.
"By early 2018, I had booked so many weddings that I realized there was no way I could also have a full-time job that fall," Schaefer said.
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So she quit her job planning events for the Columbia University Graduate School of Journalism and embraced wedding planning full time.
Now, she oversees seven employees at The Get Together Events Co., the wedding coordination business she founded, with services in New York, Nashville and Chicago.
More than half of Americans report having had a side gig at some point, according to a survey by SunTrust Banks. The company polled 2,028 adults in July.
Eight out of 10 of people with side gigs are interested in making them full-time jobs, the survey found.
But if turning that side hustle into a full-time job is your dream, there are several things to consider, such as losing your employer benefits and saving up enough to make the leap.
Preparing for the jump
Schaefer crunched numbers to determine how many weddings she would need to take on to cover her business costs and living expenses before making her side gig a full-time job in July 2018.
She also reduced costs by moving to a less expensive apartment in New York.
"I pretty much got all my finances down to the bare minimum," the wedding planner said.
It's also important to determine what kind of business entity you'll start before you make the leap, according to David Totah, a certified financial planner and senior wealth advisor at Exencial Wealth Advisors in Frisco, Texas.
There are different reasons to pick each type of business, including sole proprietorship, limited liability companies (LLC), partnerships, corporations and S corporations.
An LLC, for example, protects the owner's personal assets, so they won't be at risk if the company goes bankrupt or faces legal issues.
Learning to run a business
Just because you have a talent, doesn't mean you're ready to run a business. Sarah Petty, 50, learned this the hard way.
The Springfield, Illinois, resident was a marketing director at an advertising agency when she got pregnant with twins and decided she wanted to stay at home.
Petty had been taking portraits of her friends' kids and getting referred to others, so she rented a small studio in 2001 and decided to make photography her full-time job.
"I had a mortgage and I had two babies to feed," Petty said. "We were living on two incomes and, all of a sudden, one of them was gone."
You have to have the business, pricing and selling skills.Sarah Pettyfounder, Sarah Petty Photography & Joy of Marketing
Petty's rookie mistake was that she first charged below-market rates for her work, which stunted her profitability.
Her error became a valuable lesson: She found other photographers with profitable businesses and paid them to teach her for the day.
That way, she got her questions about pricing and selling answered quickly.
"You'd think having two business degrees and working at a marketing agency, you would easily succeed," said Petty, who later founded a second business, Joy of Marketing, which provides marketing strategies to photographers.
"You have to have the business, pricing and selling skills."
Managing the loss of your employer benefits
Eric Rosenberg, 34, turned the personal finance blog he wrote while he worked in corporate finance and accounting into a full-time job as a finance writer. But walking away from his job was definitely a risk.
"The health insurance was the biggest concern," said Rosenberg, who had to purchase his own health insurance coverage after leaving his 9-to-5 job.
Companies will tell you that the benefits they pay you equal about 20% to 30% of your salary, Exencial's Totah said — but when you're your own boss, you don't have an employer paying that for you.
Self-employed people should also determine if they need disability and business liability insurance, he added.
Saving for retirement
Even though you no longer have your employer's retirement savings benefits, the need to save doesn't change.
One option is a Roth individual retirement account, which will allow you to contribute after-tax dollars that will grow free of taxes. You can add up to $6,000 in a Roth IRA in 2019 and 2020, plus $1,000 if you're age 50 or over.
Another option is a simplified employee pension IRA (SEP IRA), which is easy to set up and has low administrative costs.
Self-employed people with a SEP IRA can contribute up to 25% of their net earnings from self-employment, up to $56,000 in 2019.
Finally, there's the solo 401(k) plan. Entrepreneurs — viewed as both employers and employees in the eyes of the IRS —can contribute up to $56,000 to the plan in 2019.
This means they can make employee deferrals of up to $19,000, plus $6,000 if they're 50 or over in 2019. These business owners can also make employer contributions to the plan, based on their net self-employed income.