Almost half of millennials have a side hustle — and many of them say they’re doing it to add to savings. That sets them up to become young millionaires. You, too, can use a side hustle to become a millionaire. It’s not even difficult.
Let’s back up a step to explain.
Power of saving early
Nothing has a more powerful effect on financial health than saving early. By saving and investing when you’re young, you give compound interest the ability to work for you. That makes becoming a millionaire almost easy.
If you start saving when you’re 25, for instance, you can save as little as $175 per month and expect to have $1 million by the time you hit age 65. If you didn’t start saving until you were 45, however, you’d need to save more than $1,200 a month to have the same nest-egg.
It’s worth noting that the person who started saving at 25 only invested $84,000 of her own money. Compound interest did the rest. The person who started at 45 had to save more than three times more — $288,000 — to get the same result.
But, of course, saving while you’re young is easier said than done. The main problem with saving early is your starting salary. The typical entry-level job pays less than $40,000 annually. Depending on where you live and how much debt you have, that could leave you struggling to pay rent and afford basics like a car and food.
Thus, savings often takes a backseat. Roughly half of all adults don’t start saving for retirement until their mid-30s or later. And that makes becoming a millionaire infinitely more difficult.
Side hustle to become a millionaire
However, millennials are taking a different tack. Roughly half of them have side hustles and are earning close to $1,000 a month. That’s in addition to their regular full-time salaries, according to several recent surveys. And between 30% and 40% of the millennials surveyed say they’re using those side gigs to feed their savings.
If this group chooses to save all — or a even a portion — of what they’re earning on the side, they could become millionaires while they’re still young enough to enjoy themselves.
Consider a hypothetical 25-year-old, who we’ll call Sue. Sue has a full-time job but also earns $1,000 a month with a side gig. If she uses all of her full-time income to pay her bills, but saves that spare income each month, she’ll be a millionaire by the time she’s in her mid-40s. If she starts saving some of her regular salary as well — or if her employer offers matching contributions in her 401(k) — she’d be a millionaire even younger.
Spend some/save some
But what if she doesn’t want to be a super-saver? What if she wants to use at least some of that extra money to have fun right now?
If she used half of her side hustle income to travel, and invested the other half, she’d have a generous travel budget — $6,000 annually — and still be a millionaire before she hit age 55.
All of this assumes that Sue invests the money she saves in a broad-based basket of stocks, such as the Vanguard Total Stock Market Index fund (VTSAX). Over long stretches, big company stocks have earned an average of 10% per year, according to historical data going back to the 1920s. That makes stocks a great place to park your long-term money. However, over shorter periods of time, stocks are volatile, suffering large swings in value. Thus, they’re an inappropriate place to keep the rent money.
But is it realistic to imagine that you’ll earn $1,000 a month with a side hustle?
It’s not only realistic, it’s common. BankRate’s 2019 survey found side hustlers earned $1,122 per month, on average. SunTrust’s 2019 side hustle research came to a similar conclusion saying that the average millennial earned $10,972 per year, or $914 per month.
The time and effort required to earn that money is less onerous than you might imagine, too.
For example, dog-walking is among the most common side hustles, according to SunTrust. If you chose to walk for Rover, you would set your own rate of pay and have the option of sitting for dogs overnight, too. Based on an analysis of the rates posted on the site, the typical dog walker charges $15 to $20 per half-hour walk and takes home an average of $15 per half-hour, after site fees. Pet-sitters typically take home $25 to $50 per pet, per night, after paying the platform, according to SideHusl research.
So if our Sue walked two dogs a day, for a total of one hour; and agreed to pet-sit overnight for 10 nights per month, she’d earn at least $1,150 per month. (That’s assuming she took home $25 per night for the overnight sitting.) If she watched two dogs rather than one on the nights she pet-sat, she’d earn $1,400 per month.
Another popular side hustle is to be a virtual assistant, according to the surveys. Virtual assistants help small businesses schedule travel, book meetings, update websites or manage social media accounts. Pay varies widely based on the type of work involved and the worker’s experience. However, most virtual assitants charge at least $20 per hour and can charge as much as $50 to $100 per hour for technical help, such as website trouble-shooting.
If Sue spent 10 hours a week updating client social media accounts at an average pay of, say, $30 an hour, she’d earn $1,200 a month — and never have to leave the house, or break a sweat.
A blogger who calls himself the Financial Panther, chronicles his side hustle exploits on a monthly basis. A full-time attorney until recently, this blogger typically earns between $3,000 and $4,000 a month doing a variety of things — renting out a spare bedroom through Airbnb; charging scooters for Bird and Lime; taking online surveys; delivering for Postmates, for example. Until he quit his day job this year, he squeezed all of those side hustles into his lunch hours, evenings and weekends.