If it seems like everyone you know has a side hustle these days, it's because the trend has really taken off. As of late last year, 44 million Americans had a second gig in addition to their primary jobs.
Doing work on the side is a great way to build savings, pay off debt, or meet other key financial goals. But before you start counting up your earnings in your head, know that having that second job will cost you in other ways.
1. Materials and equipment
Some side hustles don't require an investment other than your time. But if you need tools or equipment to do your work, that will no doubt eat into your profits. For example, if you're a freelance makeup artist, you'll need to stock up on cosmetics to do your work. If you can't build the cost of whatever supplies you need into your service fee, at least make sure to come up with a rate that makes doing that extra work worthwhile, given your expenses.
Another thing: Keep solid records of what you spend to do your side job. You're allowed to claim business expenses as a deduction on your taxes, which will help offset the amount of money you're putting into your venture.
2. Travel to and from jobs
Some people get to do their side hustles from the comfort of home, but if you're not one of them, travel to and from clients is another expense you'll need to account for. If you're going to use your personal vehicle to reach your customers, be sure to maintain an accurate mileage log, because you can deduct your mileage when you file your taxes and recoup some of that cost. The same applies if you're taking public transportation -- retain all receipts so that you can deduct those costs later on.
Unfortunately, the money you earn from your side hustle isn't all yours to keep. Rather, the IRS is apt to want its share, even for jobs that pay you in cash. Keep in mind that whenever you earn $600 or more from a given company, you'll receive a 1099 form summarizing that income. So too will the IRS, and if you attempt to hide those earnings, you could easily land in hot water.
Of course, taxes aren't a reason not to get a side job (or a primary job, for that matter). Just be sure to take them into account, especially since it'll most likely be on you to pay them proactively, as opposed to having them withheld from your earnings along the way.
4. Less advancement at your full-time job
One lesser-known cost of having a side hustle is working just a bit less hard at your main job. If you're so focused on your side hustle that your performance slips, you might lose out on raises or promotions that boost your primary income stream.
That's why it's best to ramp up slowly when taking on a side hustle, as opposed to diving in full force from the start. Say you decide to get a second job at a local restaurant. Rather than commit to 20 hours of work per week up front, start by picking up a couple of evening shifts, and see how that impacts your main job. Then, work on adding shifts over time once you're confident you can manage that load. Remember, if you do well enough at your primary job, you might snag an earnings boost that's more than what your second gig will pay, so don't compromise your career for a few extra dollars on the side.
There's no question about it: There are plenty of good reasons to get a side hustle, and having one could work wonders for your finances. Just be aware of the costs involved, and plan accordingly.
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