The Danger of Side Hustle Income

If you’ve spent any time in the PF blogosphere, you’ve picked up on our preoccupation with bringing in extra income through “side hustles.”  Even Kyle and I, who aren’t allowed outside jobs, have found ourselves swept into this mania.  I now refer to Kyle’s almost-volunteer super-part-time weekend job running the sound board during some services at our church as a side hustle.  Certainly the bit of money we bring in through this blog can be called a side hustle, though I consider it more of a monetized hobby (my hourly pay rate is dismal – I consider comments to be my real reward for writing).


On the face of it, there are lots of benefits to side hustling.  There is the extra income, which many people use toward a specific goal such as paying down debt or saving for a “want” purchase.  Perhaps there is the sense that you are being super productive with your time because you have money to show for it.  You can build skills that will benefit you in your primary job or other areas of life.  There is also the view that a side hustle is a contingency plan for un- or underemployment – something that you can rely on or ramp up your efforts on should your primary source of money dry up.


danger dynamiteWhat I would like to point out in this post is the possible dark side of side hustling, which is if you come to rely on your side hustle money to fund your everyday lifestyle.  Side hustle money is awesome if you’re using it to accelerate your debt payments, but if you rely on it to make the minimum payments only you’re on your way to trouble.  Side hustle money is fun if you use it to add a luxury to your life that you know you can live without, but it becomes your master when you’re using it for your groceries.  What I am essentially warning you against is allowing your side hustle income to inflate your lifestyle.


One of my big reasons for starting this blog is to provide an accountability tool against lifestyle inflation.  Kyle and I are on the verge of earning far more money than we ever have, and we don’t want to go consumerism crazy when we get those income bumps.  But please note that I’m not against lifestyle increases.  If you are earning more, I’m all for you making very deliberate choices about where you want to augment your lifestyle (and when you will ramp up your savings rate).  I don’t want to stay at my current lifestyle level forever, but I do want to appreciate each increase as we allow ourselves to have it and not forget that it is possible (and comfortable) for us to live on less, as we have been during graduate school.


The danger of side hustle income is that it can easily facilitate lifestyle inflation if you aren’t mindful about it, just as a yearly raise or expected bonuses at your primary job can.  You are asking for trouble if you have a full-time job plus one or more side hustles that take up much of your free time and you allow your lifestyle (or even your desired savings rate) to consume all of that income.  The reason is that should something happen, you have left yourself no margin.


Elizabeth Warren explored this concept in The Two Income Trap (affiliate link – thanks for using!).  (I wish I had a full review of this book for you but I read it before I started blogging!  Maybe later.)  The basic premise is that (broadly) American families used to get along with one working spouse and one non-working spouse.  The advantage of having one spouse out of the work force at a time was that if something unfortunate befell the family and the primary breadwinner lost his job, the other spouse could enter the work force, temporarily or permanently, and the family’s lifestyle could largely be sustained.  In short, single-earner families had margin.  They had one capable spouse spending 40 hours per week (or whatever) working for pay and one capable spouse as a reserve.


These days, it is rare, particularly in the higher cost-of-living areas, to find a family that doesn’t rely on both spouses working to pay for their living expenses.  These families have no margin.  If one spouse loses a job and can’t find work quickly or is unable to work (as we saw over and over in the Great Recession), the family quickly spirals toward financial destruction – foreclosure, debt, bankruptcy.  Perhaps the working or the unemployed spouse will be able to side hustle, but what if they were already hustling?  What if they were already working 60, 80, or 100 hours per week and depending on all of that income?  There is a side hustle trap just as there is a two-income trap.


Not all side hustlers are trapping themselves, just as not all dual-income families are trapping themselves.  The way to protect yourself is to build margin into your life by not depending on all the income that you are generating.  Many dual-income families try to live on one spouse’s income and save the other’s, so that if one of them lost a job the mortgage would still be paid and only the savings rate would suffer.  In a similar way, I think it’s smart to hold your side hustle money somewhat distinct from your regular income, or at least the portion of your income that funds your baseline lifestyle.


For example, when we receive some side income we first run it through our percentage-based budgeting guidelines.  We set 23% aside for income taxes, we put 15% into our Roth IRAs, and we transfer 10% to our charitable giving savings account.  We put the remainder of the money toward a discretionary “want” goal – currently, for a DSLR.  If the side hustle money dried up we wouldn’t be hurting for it.  Those extra taxes, giving, and savings wouldn’t be put aside – doesn’t really matter to our bottom line in the near future – and our fun goal would be put off a bit longer.  No harm done.  We aren’t using it for gas money or groceries or rent.


The perks of side hustling are still strong.  At the moment, I am particularly fond of the idea of a side hustle as a hedge against unemployment – that if you (unwillingly) had more free time, you could put more time into your side hustle and try to make up for losing your primary source of income.  But I don’t think it’s smart to use up all your time and use up all your money and leave yourself with no margin in your life, even if it means that you’ve been able to fund a more luxurious lifestyle.


Do you depend on side hustle money for living expenses and if not what do you do with the money?  Do you have adequate margin in your life?  What do you think of the thesis of The Two Income Trap?


photo from Free Digital Photos


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40 Responses to "The Danger of Side Hustle Income"

  1. Ashley says:

    Wow- I’ve never thought about the two income thing and how different our lives are now compared to how it used to be! But yeah, that’s totally right- now in most families, both parents need to work just to support the family! Crazy how things change…

    when I had a “side hustle” (this was before I discovered PF blogs so I didn’t refer to it as that, haha) it was just to keep me occupied and make friends rather than for the money. It was really nice having that extra money every month that I knew I could just send straight to my savings account!
    Ashley recently posted..Saving Money with your Freezer

    1. Emily says:

      That’s great that you were putting it straight into savings and not getting accustomed to spending it. Is this the savings that you’re now living off?

  2. Alicia says:

    The small amount of side-hustle money I have is all “gravy” that does toward debt repayment or boosting savings.

    I am not sure I completely agree with the Two Income Trap as described. Yes we’re a higher consuming society than we were back then, but I know my grandparents and even my parents generation were able to survive on one income for a job that wasn’t necessarily the best. That might partly be due to the difference in lifestyle, but it also seems that as many decent jobs don’t exist, making it more difficult to survive on one income. I might be falling into a trap with that statement though, because I am using anecdotal evidence to back it up and am too lazy to look up the stats.
    Alicia recently posted..Ask The Readers: What Can I Do In Toronto?

    1. Emily says:

      You should check out the book because I tried to summarize very quickly the thesis of the entire book!

      I suppose it all depends on how you define a decent job. In many ways, our basic expenses are much lower now than they were decades ago (food, cars), but we end up spending more on luxuries and have more leisure time. I think what we’re seeing now is adults trying to support a family with jobs that used to be supplementary income (minimum wage jobs no longer for teenagers). Maybe that’s just part of the current economy. In a tough job market, though, a spouse that normally does not work could take a low-paying job to supplement the family’s income and quit it in better times.

  3. Matt Becker says:

    I love this post Emily! I hadn’t heard of the two-income trap before but it makes a ton of sense. I think having a margin of error is important, but I also think it’s important to have time flexibility. To me, the benefit of a side hustle is to either decrease the number of years until you have more freedom, or create a business you enjoy that can eventually replace your current job. But when you start using your side hustle to increase the cost of daily living, you’re just sacrificing your free time to stay stuck in the same financial trap.
    Matt Becker recently posted..This is the Moment Where All That Saving Pays Off

    1. Emily says:

      Yes, the whole post is really about time – a non-working spouse’s time, leisure time that could be spent side hustling. You are willing to sacrifice that time to buy even more free time later with passive income/FI.

  4. Yeah, all of my side hustles typically amount to less than 1% of my “day job”. It keeps me honest about how much time I dedicate to blogging and other activities.
    slug | recently posted..PenFed CD Rates Looking Strong

    1. Emily says:

      I think in 2013 our side hustles were about 2% of our primary incomes. They are fun but not making a big impact!

  5. Mrs PoP says:

    We try to operate with plenty of margin, and have pretty much always aimed for the “live on one” goal of a dual income household. We also make a habit of zeroing out spending every month and sending excess toward savings (debt payments and investments) so the source of the income doesn’t really affect things.
    Mrs PoP recently posted..He Said She Said: Hustling Or Hassling?

    1. Emily says:

      Yeah, you guys are definitely avoiding the two-income trap. We’re nowhere near living on one income right now but I hope someday!

  6. Oooh, I really like the concept of a two income trap. It’s clever and a bit counter-intuitive, like a lot of good ideas. I’m putting that book on the list.

    We try to use some mental accounting and live off just my income, while anything my wife brings in goes towards ‘good’ goals like debt repayment, saving for investment property, etc. But if we got used to living on both, yeah, our margin would disappear in a hurry.
    Done by Forty recently posted..President Obama Emailed Me About the Minimum Wage

    1. Emily says:

      Great job at keeping that margin in your life! I assume your incomes are quite unequal, though. If you lost your job you would have to supplement from savings until you found something else, right?

      1. It’s possible. Now that we have the house paid off, and assuming that I was laid off rather than quitting (i.e. – getting unemployment), we might not really need to dip into savings. We do have an emergency fund just in case, so I really doubt we’d need to dip into real investments…but you never know! When it rains it pours.
        Done by Forty recently posted..The Psychology of a Tax Return

  7. The side income that I have had has gone into savings. I don’t consider it as part of our income. It’s really nice and sweet when we do have it though.
    SavvyFinancialLatina recently posted..What is Your Next Career Move?

    1. Emily says:

      We consider our side income income for our percentage-based budgeting (as I outlined above) but the discretionary part always goes into short-term savings. It would be awesome if we actually put it toward long-term savings! Is your saving short-term or long-term?

  8. Tarynkay says:

    When we were both working, we lived on one income and saved the entire second income. We set our lives up so that we would only need one income- we took out less than half the mortgage that we were approved for, did not upgrade our car, that kind of thing. This has worked out well now that I am staying home with our son. When I return to work, we plan to continue to save my entire income. We didn’t need it before, and we don’t need it now, so we plan to not need it in the future.

    My problem with the two income trap hypothesis is that if the wage-earner loses his job, the non-working spouse is probably not going to be able to just jump into profitible employment. I have been out of the workforce for two years now and I anticipate that it will be difficult to get back in. If I had never worked and had no fancy degrees, it would be much more difficult for me to earn an appreciable amount of money. So it’s great in theory, but I think it works out best in practice if both people work and just live on half of what they bring in.

    1. Emily says:

      If I remember correctly from the book (which, um, I might well not), the argument wasn’t that one spouse should not work but just that we are putting ourselves in precarious financial positions as more and more couples are forced by their lifestyle choices to need two incomes. Exactly like you said.

      I agree that it’s unrealistic for a non-working spouse to be able to jump into the working world and earn as much as the working spouse had. But it’s better than nothing, and it can be a patch during unemployment in the other industry or could buy the family some time as they adjust to the lower income from disability, for instance.

  9. Great post Emily! For me, the biggest danger of the side hustle for a family is how it eats up time. Side hustles take place in the evening after work or on the weekends. It’s extremely easy to get so focused on the income potential of the side hustle that we block out time from family and children. I’ve even seen this with my own blogging and have worked to develop a system whereby I don’t ignore my family responsibilities. Side hustle money is awesome but family time is better. I only get one shot at being a parent and I don’t want my kids remembering a father who had no time for them because he was so concerned about a dollar.
    Brian @ Luke1428 recently posted..Price Limits, Blow Money and the 24-Hr. Rule

    1. Emily says:

      That is a whole other category of danger of side hustling that is worth considering! It applies to your primary job as well.

  10. I like the idea of living on 50% of your take-home pay, no matter what your take-home pay is comprised of – salary, bonus, 2 people working, 1 person working, etc. However, I see a 2-income family as a security measure – with two workers, the family’s chance of going without income is lower (as the chances of two people losing their jobs at the same time is lower) than it would be for 1 worker. Even though the stay-at-home spouse can enter the workforce, I think it’s a little unrealistic to assume that the income will be enough to replace the primary income, even if that SAHS can find a position in the first place.
    Well Heeled Blog recently posted..How to Find a Great Wedding Photographer On Craigslist

    1. Emily says:

      I agree that dual-income families have built-in security – as you do with multiple sources of income, no matter who is generating them. I didn’t assume and I don’t think TTIT assumes that the second income will replace the primary, only that it could help somewhat when needed. It’s the same with side hustles – they almost certainly don’t pay as much as your primary job, but they might help if you lost your job as long as you weren’t depending on the income in the first place.

  11. Interesting theory about the two income trap. I am convinced most households could live on one income, but when both people work, you want to “reward” yourself for working that hard, you have to maintain two cars, go for convenience food as you don’t have time to cook, etc. For me unless the second spouse makes a high income too, he/she is better at home (from a purely financial standpoint, then some people HAVE to work for their personal enjoyment or sanity). As far as treating side income as regular income I kind of did after it came for three years like clockwork but I had several sources so was less impacted if one dried up.

    1. Emily says:

      Having a stay-at-home spouse can be cost-saving in many ways – the time will be used somehow and it can offset labor that you would otherwise pay for. I saw how much my mother did to run the household when she was a SAHM and how much my parents outsources when she worked outside the home.

      Great job with the multiple sources of income!

  12. S. B. says:

    May I suggest another danger to side hustle income? Sometimes the preoccupation with income ends up destroying the very thing you set out to do. People usually get started with these things because they are enjoyable (e.g. writing, photography) or fulfill some purpose in their lives (e.g. helping others, changing yourself). Then when people realize there is money to be made, they sometimes view everything from that angle. While there’s certainly nothing wrong with monetizing hobbies, it does seem sad to me when people change everything to maximize the dollars.

    I’ve seen more than a few personal finance blogs start out with the goal of learning about finances or keeping oneself accountable, but within a short period of time, they mainly talk about blogging itself and monetization. The articles become chosen based on SEO and advertising possibilities.

    The irony, of course, is that many bloggers lament their day jobs as unfulfilling and “all about the money”. Yet having created something enjoyable and fulfilling, too many are then willing to turn their blog back into another form of the kind of work they so despise.
    S. B. recently posted..The Best Personal Finance Book I Ever Read

    1. Emily says:

      I totally agree with your observation – not that it always happens but that it could. I’ve been tempted to it myself when I had some success promoting a credit card, but I think it’s dying back down for me. Money is such an attention-grabbing substance!

    2. NZ Muse says:

      Hmm quite. I must admit that with writing being both my day job and my side hustle it can wear on me.
      NZ Muse recently posted..What Cards Against Humanity taught me about my career

  13. I haven’t established my side hustle yet, but I will definitely treat the income like any recent raises I’ve received and save 100% of it. That’s the only way to ensure that lifestyle inflation won’t creep in, although, needing the money probably motivates some to work harder at their side hustle.
    Cashville Skyline recently posted..Getting to Know: Impersonal Finance

    1. Emily says:

      Be careful about taxes, though! SE tax feel very high. 🙁

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  15. Thanks for the tip. I agree that side hustle income is dangerous because it can easily facilitate lifestyle inflation. Thanks for this knowledgeable post.

    1. Emily says:

      Thanks, Marissa!

  16. I am all about the side hustle, but the money I earn from any side hustles goes directly to my six-figure (cries) student loan debt. I even have it setup so that it goes into a separate account to remove the temptation to use it for something else…otherwise I think I’d be too tempted to use it!
    Shawna @ Money Misfit recently posted..Side Hustle Sunday: Writing For Textbroker

  17. NZ Muse says:

    Hmm interesting! My main argument against side hustle is that you need a really high hourly rate to combat the higher taxes involved, and a lot of side hustles don’t really stack up in that regard.

    Everyone I know who side hustles is very driven and has a purpose for that money, though. And I get the feeling (though the blogosphere and real life) that the kind of people who side hustle aren’t going to fall into that kind of trap.
    NZ Muse recently posted..Women’s Money Week: Kids. Who’d have ‘em?

  18. […] from Save Invest Give pointed out an addition danger of side hustle income: “May I suggest another danger to side hustle income? Sometimes the preoccupation with income […]

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  21. […] fun. However, just like in point 2, you have to be prepared for the side income to evaporate and not come to internalize those lifestyle increases into your expectations from your monthly pay. That is why we preferred to put our side hustle […]

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