A lot of people ask me why I waste my time with all of these silly side hustles. To most people, it doesn’t make much sense that someone like me – a lawyer with a perfectly good job – would spend my free time doing things like delivering food to people, renting out a room on Airbnb, or selling trash that I find in the street. It makes even less sense that I do this stuff when you consider the fact that my wife is a dentist. People with my background just aren’t supposed to be doing work like this.
Admittedly, these side hustles don’t make me a ton of money – at least not in the traditional sense. Â Sure, I can make an extra couple thousand dollars in a year. Â In fact, last year I made over $14,000 doing a bunch of different side hustles that pretty much anyone can do. An extra $14,000 in a year is nice, but it isn’t going to be enough for me to live on. In the grand scheme of things, it seems pretty small.
But, like with most things in the personal finance world, there’s much more than meets the eye. We already know about the impact of a “dumb” side hustle over the long term. As I’ve discussed before, someone making just a few extra hundred bucks per month (which ANYONE can do in today’s economy) can turn that side income into a huge, six-figure sum later down the line. Â Not bad for a “dumb” side hustle.
For those of you in the financial independence/early retirement camp, these dumb or silly side hustles are worth significantly more than you think. You don’t even need to give it 30 years to grow. Â Depending on how much you can make in a year, your dumb side hustle – the one that all of your friends make fun of you for doing – could be worth six-figures right now! Â How can this be?
The secret lies in the 4% rule and the amount that you need to have saved in your nest egg. Â Let’s take a closer look.
The 4% Rule
Before we jump into the underrated value of the side hustle, we need to talk a little bit about the most famous rule in the financial independence/early retirement community – the 4% rule.
Broken down, the 4% rule is pretty simple. Â It basically says that you can spend 4% of your nest egg each year and, in theory, it should last you for the rest of your life. Â Thus, if you have $1 million dollars saved up, you can pay yourself a $40,000 per year salary for the rest of your life (4% of $1 million dollars equals $40,000).
This figure isn’t made up either. Â It comes from the Trinity Study, which is basically a study by a bunch of professors that determined this safe withdrawal rate. Â In almost all instances, withdrawing 4% over 30 or more years should result in you never running out of money. Â As explained in the study, with a 3% or 4% withdrawal rate, “portfolio success seems close to being assured.”
There’s obviously more nuance to it than that, but the point is pretty simple in the financial independence/early retirement world. Â Figure out what you spend every year and multiply that number by 25. Â That’ll give you the number that you need to have saved so that you can withdraw 4% from your nest egg every year.
If you spend $40,000 per year, you’ll need $1 million dollars in order to be financially independent. Â If you spend $80,000 per year, you’ll need $2 million dollars. Â And so on, and so on. Â Obviously, the more you need to spend each year, the more you’ll need to have saved.
How Much Is Your Side Hustle Actually Worth?
The 4% rule is a great way to figure out how much you need to have saved before you’re financially independent, but what’s interesting about the rule is that it also tells us exactly how much a silly side hustle of ours might be worth.
For example, I talk pretty often about how I made $14,000 last year using sharing economy apps. Â (If you haven’t already, check out my side hustle reports so that you can see all of the weird ways I’ve been able to earn money on the side). Â Using the 4% rule, it would take me $350,000 in order to generate that same $14,000. Â In other words, if I can figure out how to earn a mere $14,000 per year, I can forego saving $350,000 in my nest egg! Â That’s pretty incredible.
Just take a look at how much less you need in your nest egg if you can pull in just a few thousand dollars of income in a year through a dumb side hustle.
| Side Hustle Income Per Year | Value To Your Nest Egg |
|---|---|
| $1,000 | $25,000 |
| $2,000 | $50,000 |
| $3,000 | $75,000 |
| $4,000 | $100,000 |
| $5,000 | $125,000 |
| $6,000 | $150,000 |
| $7,000 | $175,000 |
| $8,000 | $200,000 |
| $9,000 | $225,000 |
| $10,000 | $250,000 |
| $11,000 | $275,000 |
| $12,000 | $300,000 |
| $13,000 | $325,000 |
| $14,000 | $350,000 |
| $15,000 | $375,000 |
The numbers are pretty astounding on close inspection. Â Every $1,000 that you can earn in a year is worth $25,000 of retirement savings. Â Someone who can figure out a way to make a measly $5,000 per year on the side can get away with having $125,000 less saved up.
$5,000 in a year is just $96 per week. Â That’s it. Â You only have to figure out how to make $96 per week and as a result, you won’t have to save an extra $125,000! Â I promise you that anyone can figure out a way to make an extra $96 per week if they really think about it.
For the super Mustachian folks out there who can spend just $25,000 or so per year, it could theoretically be possible to live a perfectly fine life by saving up $250,000 and making an extra $15,000 per year delivering food on your bike or hosting people in a spare room in your house. I know a bartender who’s currently 30 years old that could easily do this. Â Maybe it’s not financial independence in the traditional sense, but knowing that you only need to make an extra $10,000 or $15,000 in a year in order to survive is a pretty good position to be in.
Takeaways
If you think making an extra $10,000 or $15,000 in a year is hard, I have to tell you, it’s really not.  I made over $14,000 last year from renting out a spare room in my house, dog sitting, delivering food on my bike, and flipping trash that I found in the street.  And that was while I was working a full-time job and trying to get this blog off the ground!
Imagine how easy it would be to earn $10,000 or $15,000 in a year if I didn’t have to work all day too.
As for ways you can make a few extra bucks in a year, here are just a few of the things I do that literally anyone can do:
- Host people in a spare room in your house on Airbnb. Even if you love your privacy, most people could probably host someone for six days per month. That’s it. If you rent out a room in your house for 50 bucks a night for 6 nights per month, you’re looking at making $300 per month. Total income in a year = $3,600.
- Watch dogs on Rover. A few days of dog sitting per month should be good for at least $100 per month. Total income in a year = $1,200.
- Deliver food using your bike with DoorDash, Uber Eats, and Grubhub. It’s not hard to make $200 per month doing this. That’s only about $50 per week, which in most cases, comes out to just a few hours per week. You should definitely be exercising at least a few hours per week. Why not get paid while you do it? Total income in a year = $2,400.Â
- Charge electric scooters with Bird and Lime. If you live in a city and neighborhood that has electric scooters, it’s not difficult to make extra money each month collecting and charging these scooters. On a recent conference in Austin, I made $200 charging scooters in my Airbnb. Most months when I was charging scooters, I easily made a few hundred with very little work. If you make $200 per month, you’ll end up with $2,400 in a year.
Right there, without even trying, you’re looking at a total of $9,600 of income in a year. Â That $9,600 is worth $24,000 to your nest egg. And that’s if you’re barely trying.
With all this of information, maybe that silly side hustle isn’t so silly after all.
More Recommended Ebike/Scooters
Check out these other ebikes/scooters I've had the chance to do a review for:
- GEN3 Outcross Bike – The GEN3 Outcross is a solid, affordable fat tire ebike that does a good job of doing what I need it to do. It works great for city riding, giving me a smooth ride in all conditions. It’s works really well as a winter ebike since the fat tires give it good traction over snow and ice. Check out my GEN3 Outcross Review.
- Himiway Escape Bike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Bike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($100) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with $100 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
- Moomoo (15 free stocks, $100 cash reward, 1 stock of Tesla or Google) – Moomoo is a free investing app currently offering 3 different referral bonuses if you open an account using a referral link. Read my Moomoo referral bonus guide for more information.
- Webull (24 free stock shares) – Webull's current promotion gives you 24 free shares valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free shares using Webull.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- GO2Bank ($100) - GO2Bank is an easy bank bonus that I recommend people take advantage of if they have an easy way of meeting the direct deposit requirement. I like that it’s easy to open the account and that the bonus pays out quickly. Check out my step-by-step guide on how to earn your GO2Bank $100 referral bonus.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- US Bank Business ($750) – This is a fairly easy bank bonus to earn, since there are no direct deposit requirements. In addition, you can open the Silver Business Checking account, which comes with no monthly fees. Check out how to earn this big bonus here.
- SoFi Money ($275) – SoFi Money is a free checking account from SoFi. They’re currently offering a $25 referral bonus if you open a SoFi account with a referral link and deposit $10. You can also make an additional $250 as well if you complete a direct deposit. This is a good bank that is also 100% free, so you won’t have to worry about managing this account. Here’s a post I wrote with instructions on how to earn your SoFi Money bonus: SoFi Money Referral Bonus: Step By Step Guide.
- Fifth Third Bank ($225) – This offer is limited to customers in the following states: Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, West Virginia, and South Carolina. If you don’t live in one of those states, you won’t be able to open an account online but you can still open an account in-branch if you happen to be visiting a city that has a branch. This is a fairly easy bank bonus to earn, especially since there are plenty of data points showing what will trigger the direct deposit requirement. In addition, you can open the Fifth Third Momentum Checking bank account, which comes with no monthly fees or minimum balance requirements. Read my guide on this bonus here.
- Fairwinds Credit Union ($100) – Fairwinds Credit Union is offering a referral bonus for users that sign up using a referral link. Fairwinds has no fees or minimum balance, so this is a particularly easy bonus to earn. Since this is a smaller credit union, my gut instinct tells me this offer won’t be around long, so if you’re in a position to meet the bonus requirements, grab this bonus before it’s gone. Here is my step-by-step guide on how to earn your Fairwinds Credit Union bonus.
- Netspend ($40 + 5% Interest Savings Account) – Netspend is a company that provides 5% interest savings accounts. If you sign up using my referral link, you’ll get a $40 signup bonus once you make your first deposit into your Netspend account of $40 or more. That means you get a 5% interest savings account and a free $40 to start! Make sure to check out my in-depth guide on how to set up these accounts.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link.Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- Digital Federal Credit Union ($20) – Digital Federal Credit Union (DCU) is a free, nationwide credit union that I recommend to readers for two reasons. First, DCU has a $20 referral bonus if you open a free DCU checking account with a referral link. Second, DCU has a saving account that gives you 6.17% interest on your first $1,000. Check out my in-depth post on how to set this account up.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Varo ($35) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $35 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $250 if you complete a direct deposit.
- US Bank Business. US Bank is currently offering new business customers a $750 signup bonus after opening a new account and meeting certain requirements.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $100 for opening an account.
- DCU. Digital Federal Credit Union (DCU) is a free, nationwide credit union that I recommend to readers for two reasons. First, DCU has a $20 referral bonus if you open a free DCU checking account with a referral link. Second, DCU has a savings account that gives you 6.17% interest on your first $1,000.
- Personal Capital. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
Hey Panther,
I’m always a big fan of your side hustles. Thanks for the math and the preaching. I’d be more of a devotee, but between kids at home and the availability of paid overtime at work, the overtime IS my side hustle 🙂
It’s still a great motivator to remember those few extra hours of labor here and there add up to an 18% increase on my pay.
Yeah, I’m definitely not saying you need to pick up one of my silly side hustles. It’s really just a point that it can be worth a surprising amount. If I can say that you can save $125,000 less just by biking around a making $5,000 a year, that seems pretty interesting. I imagine that when I have kids, I’ll also lose the time to do alot of this stuff.
Do you pay FICA taxes on these side hustles? For early retirees, the value of a side hustle is even more important. Imagine you have a great job that includes a pension & 401k. If you retire early (say age 40), you cannot access your pension & social security for 2 decades (assume earliest pension payments can begin at age 59). You can access your 401k but you’ll pay the 10% penalty and erode the future value of account.
A side hustle has two main advantages from what I can see if you are an early retiree like the one I describe in the previous paragraph. The side hustle can produce income equivalent to several hundred thousand dollars of investment as your example shows. If your taxable accounts can’t quite bridge your post-retirement spending needs, the side hustle let’s you accelerate your retirement. Let’s say you calculate you need $1.5 Million in taxable accounts to retire at age 40. 1.5 M x 4% = $60K per year. You only have $1.2 M. You could save an additional $300K or you could retire and get a side hustle earning $60K – ($1.2 M x 4%) = $12K per year. Technically you are not retired if you need to work the side hustle and technically the side hustle is not a side hustle if you don’t have a “main job” but whether you call it a side hustle or a temp job or a seasonal job or a part-time job, you are presumably cutting your work hours.
If you aren’t 100% certain about your post-retirement spending, a side hustle gives you a little cushion or insurance against drawing more than 4%.
The second benefit is if you pay FICA taxes, the side hustle will likely increase the value of your Social Security payments as they are partially determined by the highest 35 years of earnings. Retire at age 40 and it is unlikely you have 35 years of non-zero earnings.
I’m considering early retirement and was thinking about part-time or seasonal work I could get for a the first few years. I just want a little cushion to bridge the time before I can draw on my pension or 401k.
You do pay FICA taxes on these side hustle earnings, except not for Airbnb stuff, since that’s technically “passive” rental income. Interesting point about the social security point. I’ve never looked at how social security is calculated since I guess for most millennials, we just sort of assume it won’t be there in the future.
The great thing about this sharing economy stuff is that you can snag it and just work whenever you feel like it. It takes a bit of pressure off the nest egg.
Social Security will likely be around in 40 years. Even after the trust fund is depleted in the 2030s, the inflow of taxes will be able to pay about 75% of the obligations. Maybe the benefits will be reduced but I suspect it will be around. As the fund nears depletion, there will be increased pressure on Congress to a) increase FICA taxes, b) increase or eliminate the cap on earnings subject to social security taxes and/or c) increase the age at which people can claim social security. Just eliminating the cap solves most of the funding problem. MediCare is a different story…
One of the inputs into your social security benefits formula is the top 35 years of earning. If you have less than 35 years of non-zero earnings, the formula inserts zero for the missing years.
That’s amazing, I didn’t think of it that way, but by having side hustle income, you are lowering your nest egg need by the side hustle income x 25%… genius!
It’s definitely something a lot of people don’t think about. Even earning just $1,000 a year means you can save 25,000 less.
Outstanding! Once you see the results over time, it really shows how it pays off. Imagine what that could be if you invested it and earned 5-10% a year. It makes perfect sense to hustle. Thanks for sharing!
-Brian
For sure, it’s about time. I’m shocked how much small amounts can add up to.
I’ve always appreciated your viewpoint on side hustles and agree. A little extra money can really add up over time and can help with the math regarding your withdrawal rate. It may be harder to get a high paying corporate job, but I think there are plenty of side jobs out there for the taking. Multiple income streams are a good thing to have these days and certainly been a plus for me after my layoff. Good point about the value of side hustle income to your nest egg. I never quite looked at it that way.
My dad definitely went this route. He has a small pension, and works a few hours a week cleaning up a laundry-mat. He does not need much in terms of income, and the social interaction keeps him a little bit healthier on the emotional front. I can’t imagine he’s earning over $400 a month this way, but it covers what the pension does not.
That’s terrific! And it’s an easy thing he can do on the side. Even a few hundred bucks a month could equivalent to $90k or $100k in his retirement account.
Really great points. I’m genuinely astonished at how much my side hustle is “worth.” I have more than half a dozen side hustles that bring in $50 – $100 bucks a month, but it really adds up after a while!
It does. It’s sort of like how saving small amounts over the year adds up, only instead, it’s earning small amounts over the year. Was harder to do before the sharing economy/internet stuff, but now it’s really easy to earn a buck here, a buck there, etc.
Working into your late 60’s increases your chances of health issues. Everyone should retire as soon as possible and eliminate the stress and physical toil that working places on your health. Just look at other countries where people retire at earlier ages, they tend to be happier and healthier.
This is an awesome post Kevin! I recently broke down the math as well as what the income from a side hustle can do when you factor in investing it + time + compound interest and it is incredible! Really stellar post. Anyone who is looking fast track their retirement should definitely consider starting a side hustle.
Thanks Tom! Appreciate the kind words! It is crazy when you think about it. 10k a year takes 250k saved. How easy is it to make 10k a year!? I can do that in my sleep.
Hey Kevin,
Sorry, I’m a bit late to the party with this but found your post very interesting.
One question I have though in relation to a side hustle supplementing income. In this example, do we assume you ‘retire’ and begin withdrawing the full 4%, then use additional income from a side hustle to make up the numbers needed for your desired overall income? If so, would I need to continue earning this additional income indefinitely to maintain that standard of living, since the growth within my portfolio would halt or at least grow at a much slower rate?
My assumption is that if you need 40k to live, you would technically need $1 million under the 4% rule. If you instead figure out how to make 10k a year doing something easy, you only need 750k. You pull 30k from your portfolio, then make 10k a year doing something. You’d have to keep earning 10k a year forever.