3 Side Hustles That Cost More Than They Earn

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KEY POINTS

  • Nearly 4 in 10 adults in the U.S. report having a side hustle.
  • Look for side hustles with low upfront costs.
  • In one popular side hustle, even the most successful participants earn little more than the federal minimum wage.

A side hustle can help you keep up with soaring living costs and speed up your progress if you're trying to achieve a big financial goal. According to Side Hustle Nation, about 39% of adults in the U.S. report having a side hustle.

But not all side hustles are created equal. The wrong gig could actually end up costing you money. Here are three side hustles that could cost you more than you earn.

1. MLMs

Do you have a friend who constantly brags on social media that they make five figures a month selling hair products or supplements? They're probably working for a multilevel marketing company, or MLM. 

MLMs are businesses that use independent contractors working on commission to sell products directly to their friends and family. Sometimes, the business model is referred to as network marketing. But the real money comes when you recruit others to the business to work as your "downline," since you get a portion of their commission, plus a part of the commission of anyone else they recruit.

Since the business model relies on a constant stream of new recruits, you'll see a lot of outlandish claims about how much you can earn in an MLM. But a 2018 AARP study found that nearly half (47%) of MLM participants lost money, usually because MLMs often require contractors to buy inventory upfront. Only a quarter earned a profit. Of those who did profit, most earned less than $5,000 the entire time; only 3% of MLMers reported making $25,000 or more.

Put another way, if you earned $5,000, you'd be more successful than 88% of other MLM participants. The average MLM participant reported working 13.3 hours a week. If you earn $5,000 working 13.3 hours in 50 weeks out of the year, you'd make about $7.52 an hour, which is only slightly more than the federal minimum wage.

2. Mystery shopping

Some companies use mystery shoppers to buy products and relay feedback about their experience. You're paid a fee per assignment, but it isn't much -- often $20 or less. You'll typically pay upfront for the purchase, then file a detailed report about your experience. Many companies require you to complete the report within 24 hours. You get your fee and reimbursement once your report is accepted.

But if you miss the deadline by just a couple of minutes or your report is rejected for some reason, the company can refuse to pay you. In that case, you're not just getting stiffed for your services. You've lost the money you spent making the purchase.

Even when you're paid as agreed, many mystery shopping gigs simply aren't worth the time. Mystery shoppers often report that the gigs are far apart, and you're not reimbursed for gas. Many assignments require you to read extensive instructions, and then fill out several pages' worth of paperwork.

And while legitimate mystery shopping companies exist, many are outright scams. One big red flag: If the company wants you to send it money for any reason, it's not a legitimate opportunity.

3. Day trading

Day trading surged in popularity during COVID-19 lockdowns and in early 2021, during the peak of the meme stock craze. While day trading may be profitable in the short term, several studies have shown that the overwhelming majority of day traders lose money over time. 

For example, a study of nearly 1,600 Brazilian day traders found that 97% of day traders who persisted for 300 days or longer lost money. Only 1.1% earned above the Brazilian minimum wage.

The few who do succeed at day trading aren't doing it as a side hustle. They're often highly skilled professionals who use high-frequency trading technologies that retail investors don't have access to. For most people, a buy-and-hold strategy is the best way to build wealth over time. 

Tips for finding the right side hustle

If you're trying to earn extra money through a side hustle, follow these tips:

  • Seek out a side gig with low barriers to entry, meaning you can get started without a huge money or time investment.
  • Don't be swayed by get-rich-quick promises. It takes time to build a lucrative side hustle. Be skeptical when anyone claims you'll make enough to quit your day job overnight.
  • Look at your hourly earnings. Once you get started, keep track of how much time you're spending, as well as your earnings and expenses. If you're not making the equivalent of a living hourly wage, seeking out a traditional part-time job may be a better bet.

A side hustle can provide you with a lot more financial freedom. But if you don't choose your side gig carefully, it can also cost you and damage your personal finances.

Our Research Expert

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