MONEY
15/05/2018 09:24 SAST | Updated 15/05/2018 09:24 SAST

5 Ways To Get Your Side-Hustle Off The Ground While Avoiding Debt

This may require a bit of time and patience.

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A growing number of South Africans are pushing their hobbies, skills and interests through what have commonly become known as side-hustles — the hope being to either create an income, or to supplement the one they already have.

Starting one's own business is a preoccupation for at least 34 percent of South Africans aged 18 to 24, according to the 2017 Old Mutual Savings and Investment Monitor.

"When we asked respondents who indicated that they do think about starting their own business what was holding them back, the primary barrier cited was a lack of funding," said Lisa Airey, strategy analyst at Old Mutual unit trusts.

"While this finding is disheartening, it is unfortunately not surprising, as the vast majority of South African businesses are self-funded. Thereafter, the primary source of funding is loans from family, with little evidence of loans from financial institutions," she added.

She emphasised, however, that depending on the business venture, hopeful entrepreneurs can create startups without getting into a debt trap — but this tactic takes patience.

Airey's suggestions:

1. Save for your capital

Firstly, Airey highlighted the importance of accurately gauging how much capital you will require to turn a business dream into a reality. "This is a crucial balancing act, because underestimating your capital requirement could result in you running out of money before the business has a chance to become profitable; while overestimating costs could delay the process unnecessarily. Once you have an accurate estimation of what your investment objective is, you'll be able to calculate how much you need to save to achieve this investment goal."

Saving may require patience. You will need to give yourself some time before you launch.

2. Establish how much money you can put away each month

"One of the biggest barriers to saving successfully is spending whatever is left over after we meet our monthly financial commitments. To avoid this, we need to make saving a financial commitment in itself," said Airey. She suggested the 50/30/20 rule when budgeting and allocating money to saving and investments. "The rule is simple, of your income, 50 percent should go to your living expenses, 30 percent should be used for flexible spending, which could include internet, gym fees and other miscellaneous negotiable expenses, and lastly, 20 percent should be allocated to your formal savings and investments," she explained.

3. Have a debit order for monthly investment contributions

Airey suggested setting up a debit order to ensure monthly investment contributions are adhered to. "The most important trait of a successful investor is consistency in monthly contributions. Setting up a debit order will avoid the risk of being tempted to spend money that you should be saving and will ensure you never go a month without getting one step closer to living the dream of being your own boss," she said.

4. Don't only have a market plan, budget for it

"The key to business success is developing a marketing plan from the very beginning. Budgeting for a marketing plan should be factored into any business' set-up operating costs. A good marketing plan will set clear objectives for your business, ensure you set realistic and measurable goals, and know who you need to target to grow your business," she explained.

5. Set yourself a realistic launch date for your business

"You'll need to be realistic in calculating the time horizon here," said Airey, who also suggested selecting an investment vehicle best suited to achieving that goal.

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