5 Ways Your Side Hustle Could Cost You Money
Find out some costs you may need to pay when pursuing a side hustle or freelance opportunity.
- A side hustle could help you increase your income and reach your financial goals.
- However, you may need to pay for some expenses like supplies, self-employment taxes, and training.
- Before committing, consider the potential costs associated with a side hustle.
With living costs on the rise, many people are looking for a way to increase their income. For some, getting a side hustle may be an attractive option. If you find a side hustle that interests you, this could be an excellent way to earn more money. But you should know that you may need to spend money when you commit to a side hustle. Here are five ways a side hustle could cost you money.
1. Supplies, materials, and equipment
Depending on the side hustle you choose to pursue, you may need to first set yourself up for success to do your work well. You may need to spend money on supplies, materials, or equipment before committing to your gig.
Not all side hustles require upfront costs. If you don't need these supplies, materials, or equipment upfront, you may need to make purchases as your side hustle grows.
If you want to avoid high operating and supply costs, research side hustles with low startup or operational costs. An online side hustle, like freelance writing, graphic design, or tutoring, may have minimal costs.
2. Educational costs
If you're taking on a side hustle that requires additional knowledge or the development of a new skill, you may decide to invest in education. While some training could potentially be free, like reading a book or online research, other training like taking a course could require a money investment.
3. Online marketing costs
If you're planning to market your products or services online, you may choose to create a website. While social media can be an excellent free tool, a website will cost you money. Plan for the expense of a domain name and hosting costs. You may need to plan for higher expenses if you hire a website designer or website management team.
The good news is there are many affordable ways to build a website. If you're just getting started with a side hustle and want to create a website, there are low-cost hosting plans and free design options available.
4. Self-employment taxes
You'll likely be a contractor or self-employed individual if you commit to a side hustle. Instead of receiving a regular paycheck with taxes already deducted, you'll receive your earnings and then be responsible for paying all of your taxes yourself.
You need to plan ahead and set aside enough savings to cover all of your self-employment, federal, state, and local taxes. If your side hustle brings $1,000 in a week -- you want to make sure you don't spend the entire $1,000.
Speaking with an accountant may be a good idea if you're new to self-employment income and plan to bring in a significant amount of money. Your accountant can help you figure out how much money you should set aside for taxes.
If you want to learn more, check out these tax tips for freelancers.
5. Vehicle usage costs
If you're considering a side hustle that requires you to use your vehicle, you should consider the costs associated with using your car. This includes the cost of regular maintenance, the cost of wear and tear on your car, and the cost of gas.
The IRS allows you to claim deductions for vehicle use for self-employment purposes. Your deduction is based on the mileage you drive for business purposes. Keep an accurate record of your mileage to take advantage of this tax deduction.
Consider potential side hustle expenses
Before beginning any side hustle or side gig, consider whether it's the right fit for you. Choose an opportunity that fits your interest, skill sets, and lifestyle.
If it feels like you may need to spend too much money (or more money than you could reasonably earn), you may want to choose a different side hustle. After all, your reason for picking up a side hustle is likely to increase your income.
Side hustle ideas that could boost your income
If you're thinking of committing to a side hustle to make more money, here are a few ideas:
- 5 Side Hustles You Can Do on Your Own Schedule
- 10 Side Hustles That Could Score You an Extra $100 a Week
- 6 Side Hustles for Introverts
- 3 Side Hustles That Could Pay for Your Next Vacation
- 4 Lucrative Side Hustles for Creative People
If you need more help reaching your financial goals, check out our personal finance resources.
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