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Is Your Side Hustle Actually Hurting Your Bank Account?

Is Your Side Hustle Actually Hurting Your Bank Account?

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The “gig economy” is in full swing. TaskRabbit. Uber. Etsy. Airbnb. You name it, there’s a platform for just about any kind of side hustle imaginable. According to the United States Census Bureau, the number of “nonemployer businesses” rose 3.6% to 25.7 million in 2017. And there seems to be no letup in the demand for on-demand jobs: Intuit projects “the number of people working on-demand jobs will grow from 3.9 million Americans in 2016 to 9.2 million by 2021.”

Opting for a side hustle can be a means of saving for something bigger such as a house, a new car, or a vacation. For some people, a new gig adds flexibility and extra padding to a tight budget; for others, it’s a way to make money from a hobby they enjoy or a chance to try a new line of work that could lead to a new business venture. But before you make the leap to a side hustle, consider the pros and cons, the expenses you might incur, and whether your income expectations are realistic.

Photo: Flickr.com/ben_osteen

A Side Hustle Doesn’t Necessarily Mean You Can Set Aside Any Costs

Research indicates that the main reason people look to side hustles for a second income is to create or improve their financial stability. But before you fasten your seat belt and head off to pick up your first Uber customer, you might want to take a look at some of the hidden and unexpected costs that can come along with side hustles. A few examples: To become an Uber driver, you’ll need a four-door vehicle and comprehensive automobile insurance with third-party property damage coverage. You’ll also have to pay for your own gas as well as car maintenance and cleaning. Airbnb requires that you provide essential amenities like towels and linens, not to mention emergency supplies, in addition to having all the bells and whistles that go along with maintaining a high rental property rating, which could include remodeling. Professional services such as tax preparation can require expensive certifications or licenses; a trade job like a handyman might necessitate investing in equipment. Even becoming a podcaster can come with costs: While you can produce podcasts from your phone, high-quality podcasts typically require equipment.

Photo: Flickr.com/James Morris

An Easy Side Hustle Can Still Be Taxing

Because many side hustles pay without taxes, you’ll owe the IRS come tax time — depending on how much money you make, you may have to pay quarterly taxes to both the state and federal government. If your tax expertise is limited, you might need to hire a tax advisor or purchase online tax software to make sure you’re correctly filing any tax information that relates to your side hustle.

Photo: GoodFreePhotos/pasja1000

Extra Income Can Come In Handy

Once you determine the costs of your side hustle, you’ll have a better idea as to whether you’ll earn enough extra cash for that family trip, large purchase, retirement home, or emergency fund. Intuit’s research found that earnings range from $5 to $61 an hour, with an average of $34. According to a Stanford study that looked at Uber drivers, “Active drivers gross an average of $376 per week and $21 per hour. More than 60% of those who start driving are no longer active on the platform six months later.”