A Little Bit Richer

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Hello, I'm Iona Bain, and welcome to A Little Bit Richer, the podcast unpacking the money decisions that shape your financial future, brought to you by Legal & General. Having a side hustle is something many people are opting to do or are at least thinking about doing, whether it's a passion project that earns some extra income, creating content online, or selling a product or service. Generating additional cash is fast becoming the norm. But what happens when you want to turn your side hustle into your main job? How do you prepare and get yourself into a strong position? Joining me today to help you understand the key considerations when thinking about making this decision is Fis Martins. She's a chartered accountant, speaker, and founder of Finance Matters UK, which offers financial education. Fis is someone who left a six-figure job in banking and backed herself by going all in on her own business. But what did she do before making the leap? We'll find out now. Welcome, Fis.

Fisayo Martins: Thank you. Thank you for having me.

Iona Bain: Thank you for joining us. We're going to start off with a 30-second answer to a question, which is, "For anyone thinking of making a side hustle their main gig, can you tell us the most important considerations they need to think about before taking the leap?" Ready?

Fisayo Martins: Yes.

Iona Bain: All right, let's go.

Fisayo Martins: I've got two. The first is, can you afford it? Big one for me. Can you actually afford what that looks like if you were to leave your job, whether it's high-paying, whether it's mid-paying, whatever that looks like? Number two, a little bit on the negative side, people think, but what's the worst-case scenario if you did leave? I think once you know those two things, you know what hurdles are before you and if you can manage them.

Iona Bain: That was super quick. I love it. I think it's really great to encourage people to be clear-eyed about going freelance or taking up a side hustle, because people can feel very inspired to do it in the beginning. But they've got to be realistic about it. You talk to a huge audience of young professionals about money and building financial freedom. How common is it right now for people to be balancing a side hustle alongside their main job? If it's getting more popular, why do you think that's the case?

Fisayo Martins: It's really popular at the moment. If I think about my own surroundings, I know more people who do have a side hustle than don't. I think one of the things that really plays into it is probably the state of the economy at the moment and the impacts, of course, from the cost-of-living crisis and how prevalent that still is today. I think more people have shifted towards having a secondary source of income. Unfortunately, I do think that part of that feels like a necessity as opposed to a preference. There's that need to feel some type of security and feel like, "Do you know what, if I lost my full-time job today, do I have something I can fall back on?" Actually, not even thinking that far ahead, can they just afford their normal living day-to-day expenses? Most people are really squeezed at the moment, so they feel like they need to have a secondary source of income. That uprise in more people having a side hustle, unfortunately, I think, is more of a necessity than it is a preference.

Iona Bain: Do you think in an era of AI and rising job insecurity, maybe everybody needs to consider having a side hustle?

Fisayo Martins: I don't like the idea that I feel like people should have to. I feel like it should be sufficient to have one main gig and be able to sustain you and everything that you need. But it is a smart decision to have something that can back you up. I think there's a lot of fear around, as you mentioned, AI and the type of impact that has on people, right? We've seen a lot of people being let go. That fear that people have in case things happen at their organisation: how do you deal with that? It is important. It is a great decision to make if it's something that someone can manage.

Iona Bain: Also, presumably, there are lots of people who have got activities and hobbies that they do in their spare time that they really enjoy. There is always that danger that if you then turn that into a formal side hustle, you take some of the joy out of it, as well.

Fisayo Martins: Of course. It's great to have other things outside of your living needs that you don't have to think about, "Oh, I have to do this." If a hobby does turn into something that is monetised, great. But I always try to nudge people to still find something to replace that gives them a sense of escape and freedom, that's something they can just enjoy and not have to think about the financial benefits of it.

Iona Bain: Monetising every moment of the day. That's not what we want.

Fisayo Martins: Exactly.

Iona Bain: Talk to us about your own journey. You made that leap from a side hustle alongside a full-time job to actually turning that side hustle into your full-time job, which is amazing. How was it?

Fisayo Martins: Great now. I'd been in the corporate world for just shy of a decade. It's all I'd known. Very familiar with what it looks like to wake up and go to a 9-to-5 or log on to Teams notifications, and so forth. In my case, I didn't actually have the intention to turn my side hustle into a full-time gig. It just so happened that it ended up being the direction that I took in the end. But once I'd made the decision, I really snapped into planning mode and thought about, what is the worst-case scenario? Can I afford to do this? What do the next 12 months look like in a good case and a bad case? Having that understanding of what that looked like, I guess, prepared me. That allowed me to actually make decisions from a place of information. Sure, there are some people who can just wing it and see how it goes, and it can work out great, but there's a sense of security and calm that you also have when you've foreseen the hurdles, the circumstances, and had that in your mind as to what the worst-case scenario could be. Initially, making the leap was definitely still a little bit daunting. Now that I'm in it, I'm having a great time.

Iona Bain: You have got no regrets.

Fisayo Martins: No regrets. I also say to myself, "I'm young. I can experiment and see how things go, and if I don't like it, return to the working world."

Iona Bain: For you, was making a plan absolutely key to turning this side hustle into a full-time job and for you to feel comfortable doing it?

Fisayo Martins: Yes, absolutely. Because as I mentioned, whilst I didn't decide to make the side hustle into a full-time gig from the outset, once I'd realised, actually, that's the direction I'm going to take, it was really important to understand the financials behind that. What does that look like from a sustainability point of view? Because often what you find is the financial aspect that drives a lot of the decision-making. Can you afford to do this? Actually, if you're in dry spells or in seasons that aren't working out as well, that often restricts how many things they can do and the decisions they can make. Actually, really understanding the impact of what a 12-month period could look like for me was integral to then knowing how to navigate what the next 12 months could look like. The plan for me is really key. Of course, it doesn't mean that the plan is going to go according to plan. But if you have a view of what things can look like when things start going a little bit left, actually, you know, "I need to get back into the right lane," or, "I need to get back to equilibrium." Having that foresight already is less daunting than approaching a track where you don't know where the hurdles are placed. It's really helpful.

Iona Bain: My mum says, "Always have a plan, and if the plan doesn't work out, just come up with another plan."

Fisayo Martins: Exactly.

Iona Bain: What are the clearest signs for people to think about that they should go full-time with their side hustle? How do you know the difference between just being fed up with your job and wanting a change, and actually really committing to that passion and wanting to make it work?

Fisayo Martins: I think circumstances are different for everyone. Person A might have a clear-as-day sign that says it's time to go full-time. Maybe they're making a generous amount of revenue in the business that completely out-earns their 9-to-5. You can have Person B who probably isn't generating as much as they get from their full-time job, but there's clear direction as to where it could go if they did go full-time. There is no one sign for each individual. But I think there comes a point where you can weigh up the pros and the cons and what the direction can look like, and almost make an informed decision as to whether it's worthwhile doing so. In line with that, actually, I do echo that once you do make that decision, you then are motivated to make it the right decision.

Iona Bain: It's almost like you have to trust yourself that you'll make it work.

Fisayo Martins: Yeah, exactly. I think that sometimes can naturally kick in and sometimes not so naturally. But if you can channel your mind to think in that way, it's really helpful.

Iona Bain: Fis, what should people do to ensure that they are financially ready to go all in with their side hustle? How can they cushion the impact of losing a guaranteed salary?

Fisayo Martins: Yeah, well, one of my favourite terms in my vocab is an emergency fund. Absolute necessity. For me, it's what gives you the element of choice to actually say, I want to try this thing, and can I cushion myself financially to do so? It gives you a bit of a cushion in case anything does go left, which is really important. I also echo that they should have a look at what the next 6 to 12 months looks like in a best-and worst-case scenario. To do that, you want to think about your current responsibilities, how you'd be able to sustain that, and what that might look like. One of the other things is just the idea of having a stress test. When we talk about stress testing, it's to literally test different scenarios under an element of stress and identify what could that look like for me. In the situation where the business you want to go full-time on isn't performing as well financially, and you have to maybe pay yourself less in a particular month or particular period, what does that look like for you, and how would you combat that? It's that forward-thinking, having that plan of if I was to encounter this hurdle, how high do I have to jump, and do I have the tools to make that leap?

Fisayo Martins: One of the things that I've done personally is revisit all of my finances and the aspects of my finances that could take a different direction. I was previously overpaying my mortgage, and I knew that, "Okay, when I'm going to take a pay cut now, paying myself in the business, can I still continue to make those overpayments?" What I decided is, actually, I can, but at a reduced rate. But even with that, I still have that cushion that: if there was anything to change in my income now from the business, what would I be able to cut back on? It is that overpayment. I could fall back a little bit. That is the element of that stress testing, as opposed to planning that on the spot, where you're more likely to be in a bit of a frenzy.

Iona Bain: Is it also sensible to just try and find ways to cut your expenditure anyway when you're going full-time on a side hustle?

Fisayo Martins: You want to be thinking about what is a necessity. You want to think about what takes priority and what is a desire. I don't personally believe that you have to strip back on absolutely everything. I still believe in maintaining a good quality of life. You still want to enjoy the journey, enjoy life, and not feel like your life has done a complete 180. So it definitely is important. A lot of people ask me, "Okay, what does a plan look like?" There are a few main things when it comes to devising a plan, right? Sit down and look at what things look like right now, what you want them to look like, and then identify what that gap could look like. That gap could be your worst-case scenario; it could be your best-case scenario. How would you address each of those points? If something were to go wrong, if you had to stop business today, if you had your best earning month, best earning year, what would you do with those funds? What would you do with the strategy of the business? It's about having a look at where you're trying to get to, what the journey looks like, and the tools that it requires of you.

Fisayo Martins: From a financial perspective, it's having a look at how you're going to manage things differently. If you're in a good position currently, financially, you've got a good system in place: you get paid for your job, automatic things go out, your savings, your pensions, your investments, your monthly spend, etcetera. That is likely to look a little bit different when your income is a bit turbulent or might not be as consistent. To make a plan, you want to have a look at all the different categories that you need to pay attention to, and rank them in order. Identify changes that you need to make. Identify things that you might need to keep a closer eye on that you can't just leave in the background. Then have a look at what you need to do in terms of how frequently you need to review that. Having a look at that, from a general perspective, what is required of you, and the scope of your stress testing element, what happens if this goes wrong? I think that should give you a good starting point.

Iona Bain: Having a few scenarios like, "If X happens, I will do Y." Yes, exactly.

Fisayo Martins: Exactly that.

Iona Bain: From a psychological point of view, do you think it's important as well to brace yourself for the fact that it will probably be really hard work, especially in the first few years, and then you'll hopefully get to a point where it's slightly easier?

Fisayo Martins: Yeah, absolutely. I think there's the joy of, "I've just quit my job," that people would like to feel. Many of us do. I definitely felt it. It's this overwhelming sense of "I can do what I want now."

Iona Bain: Freedom.

Fisayo Martins: Literally, freedom. Don't have to wake up to Teams pings every morning, et cetera. That is great, right? But then there's also another side of that reality where things can get hard sometimes. Things aren't always certain, and uncertainty is uncomfortable for humans, so that's natural. Having that perspective that there are two sides to this coin, right? Navigating both is part of the journey. It's usually the challenges of navigating full-time entrepreneurship that allow you to make decisions that elevate you in the end. Definitely think about what two sides of a coin can look like so that you're prepared for what that feels like, as opposed to thinking it's going to be a smooth ride from start to finish.

Iona Bain: Yeah, absolutely. One of the biggest financial losses that people experience when they go self-employed, or they take up a side hustle full-time, is losing those pension contributions from their employer, and other benefits as well. How do folks plug that gap and make sure that going full-time on their hustle doesn't cost them their future?

Fisayo Martins: Yeah, this is one of my favourite topics: pensions. I am a pensions advocate. When you're younger, it's the best time to be thinking about it. If anyone's thinking about going full-time or who's made the leap, this is one of the areas that I encourage them to look back on, because often what happens is you leave your job and a lot of people leave their pensions behind. There are millions in unclaimed and lost pensions currently in the UK, and a lot of that is down to individuals having transitioned from jobs and forgetting that they've got a whole pension pot sitting somewhere. Look after that straight away. Then what I encourage people to do is to assess how much it's comfortable to keep making. Often when you make the transition from full-time work to entrepreneurship, things can be a little bit turbulent from a financial perspective. Actually, if you're a business owner and you have a limited company, you can make direct contributions from the company into your Self-Invested Personal Pension, which is a very tax-efficient strategy.

Iona Bain: That's really clear. Can we just dig down into the different ways that you could go full-time with your side hustle? Because you've mentioned there are different structures, such as having a limited company versus being a sole trader. A lot of detail to get into there, but maybe you can just do a quick overview of what those different options mean and which one could be right for you.

Fisayo Martins: Yeah, of course. I'll give a quick overview of the two. A sole trader: when you're a sole trader, you're seen as the same legal entity. You and the business are one. When HMRC sees your revenue for the year, whether you've made income from a previous full-time job and now from your side hustle, it's seen as one pot, essentially the same legal liability. If something goes wrong with your business and you owe funds to a party, well, if your business can't fund that, then you are legally responsible for funding that also. Because of that, there are tax implications. When you're a limited company, you're a separate legal entity. You are one person, and the business is effectively one person. If your business were to fall into hardship and owe, let's say, a third party any funds, and it can't pay that, it doesn't fall on you because you're a separate legal entity. When it comes to revenue, what HMRC will see is, actually, your company has made this much, and then you have made this much. Really, a segregation of who is who and what is what. Because of that, tax is treated differently. When it comes to a limited company, the business gets paid first.

Fisayo Martins: All the money that comes in is the business's first before any of that money can go to you. You're effectively paying yourself from the business. When you're a sole trader, everything is in one. You're in one pot. Whatever the business has made is essentially what you have made in comparison to a sole trader, which will follow the typical PAYE system that people see from a workplace. You've got your basic tax rate band, higher, and additional, and it will follow that. To just give you a quick example, if you're working a full-time job and you've also got a business and you're operating as a sole trader, if you exceed a certain amount in your full-time job, and you start making a great amount of money from your side hustle, you're being taxed based on the tax band at your full-time job, which might not be as efficient as actually having a separate legal entity that reduces that tax liability. But there is a nuance there in terms of when it becomes the right leap to make from a sole trader to a limited company. As a ballpark, it usually is around when you've started making around 50,000 in profits, but it's not always the case for everyone.

Fisayo Martins: It depends on what you're trying to do with the funds in the business, whether you're trying to retain it, extract it. There are so many different elements to consider there, but ultimately, you need to know what the right fit is for you to then have the optimal financial structure.

Iona Bain: Okay, that's really interesting and will give people some food for thought if they are thinking about making the leap and they're considering the best approach to take. That's really helpful. Now, as a chartered accountant, you must see people make financial mistakes. We're all human, so it happens when they go full-time on a side hustle. Can you share some of the most common ones?

Fisayo Martins: Yes. I'm going to sound like a broken record, but no plan, having no plan. I speak to so many individuals, and they're almost just like, "Well, I just want to quit." It's a desire, which is great. It's great to have the desire.

Iona Bain: Do you think sometimes it's spontaneous, even?

Fisayo Martins: Yes, because I think some people fall into seasons where they just absolutely hate being at work, which is normal. It's part of the journey. But then also, sometimes it's something that's been brewing, and then finally they've hit their breaking point, and they're just like, "You know what? I'm over it." That's fine, but you can still have a plan. Even with the spontaneity of it, what can I do between now and the next 6 months or 12 months? For some people, they don't realise that the best thing to do is to ride it out for the next 3 months, get as much as you can from income so you can put that towards an emergency fund, and so forth. But without the plan, you're making decisions based on anything. You're making decisions based on emotion. Emotion is a fuel for entrepreneurship, for sure, but you need strategy, and strategy requires a plan. The second thing I would say is people not understanding the legalities of it. As we just spoke about, sole trader versus limited company: what are the requirements? What are the key returns you need to file in the year? Self Assessment tax return, corporation tax, VAT returns. There are so many things, and often people don't understand what is required of them.

Fisayo Martins: When they do make the jump, and let's say they become a limited company, they're so unaware of all the things they need to keep a record of, the things they need to file away, the structure that's required, when deadlines are actually due, and therefore, the penalties that come with missing those deadlines. Not understanding that aspect is also quite a prevalent mistake. I do say to people, I know the accounting side is boring: you can leave it to the accountants to a degree, but it's really, really important that you understand what you need to do.

Iona Bain: Finally, for anyone who is listening or watching this and maybe has got that dream of going full-time with their side hustle, what's the one thing that you would recommend that they think about once they go away and boil the kettle for a cup of tea?

Fisayo Martins: Yeah. Can you afford it? If you can answer that question, that will tell you the next few things that you need to do. Actually, if the answer to that question is no, that's not a bad thing. It just means that you need to map out when you can afford it. Again, make a plan.

Iona Bain: That has come through very loud and clear, Fis. It's great. Thank you so much. I really appreciate it.

Fisayo Martins: Thank you so much. Great conversation.

Iona Bain: That brings us to the end of this episode. Hopefully, it's one you found useful and inspiring. If so, please do consider sharing it to help others get a little bit richer, too. This podcast is brought to you by L&G. Don't forget, you can keep up with the show on YouTube, TikTok, and Instagram @LegalAndGeneral. Plus, if you've got a question or a topic that you would like answered on the show, all you need to do is get in touch on our socials. We love to hear from you. See you soon, and thanks for listening.