A surprising 44 million American adults have a side hustle, one BankRate study finds. The side hustle is glorified in popular culture, littering social media news feeds, either leaving you feeling pressured or making it easy to get tempted and jump on the bandwagon.
Considering the benefits and drawbacks of a side hustle before diving in head first can help you supplement your income without heartache and regret. So let’s slow down and see if it makes sense or not, when it might and why — and when it might not.
Why Side Hustle?
Both the economy and society have changed since years gone by, with the most recent notable shift occurring after the 2008 recession. During that difficult time, many one-income households took the hardest hit when their earner was laid off and unable to find employment for an extended period of time. For thousands of people, foreclosure, repossession, and bankruptcy resulted. Having two incomes became a priority for many families during and following the recession, and for single parent homes, having two incomes became a priority for the sole breadwinner.
Supplementary gigs — known as the “side hustle” — speak to this need, providing a flexible way to earn as you need additional income and protect some income should an unexpected layoff occur.
Today, the top five side hustles are, in this order:
- Freelance work (76% of freelancers work in the tech industry)
- Dog sitting
- Driving for a ride-share service like Uber or Lyft
- Running an Etsy store, selling homemade products
Another contributing factor to the growth of the side hustle is engagement. 70% of employees are not fully engaged in their day job due to a number of reasons, including:
- Not enough autonomy and trust from their leaders; limited ability to think outside the box and design their own day
- A poor understanding of the impact of their work in their company, community, and world
- No correlation between the effort they put in and the recognition they receive
The side hustle can provide new autonomy, meaning, and results that directly reflect effort, giving some employees something to look forward to once their shift is complete.
The Good, Bad, and Ugly of the Side Hustle
Like all things, earning a supplemental income on the side comes with an upside and a not-so-glamorous side. Understanding the pros and cons can help you manage your expectations and protect your personal interests.
1. You can make a lot of money.
Perhaps the greatest advantage of your side hustle is the income it provides, which can significantly impact your household finances and experiences. An impressive 25% of people ages 18-26 bring in at least $500 a month from their side gig. For those who need the money, this can be the difference between paying the rent and not. In contrast, those who are able to make ends meet without their side hustle report using this money for household projects, traveling, and other luxuries they might not otherwise be able to afford.
2. You can boost your career.
Side jobs can provide hard-to-find opportunity to grow your self-confidence, learn about business, and fill out your resume. Because you have complete responsibility for your own success, anything achieved can be accredited to your own efforts.
3. You can work around your schedule.
Most side jobs come with unmatched flexibility, allowing you to work when and where you choose. This makes the side hustle a great solution for single moms, busy executives, college students, and everyone in between. You can plan your schedule in advance to meet important timelines without sacrificing at home or at work.
1. It requires a time investment
Any get-rich-quick scheme is exactly that – a scheme. To make money from a side hustle, it takes a genuine commitment and effort. As a matter of fact, 61% of people who actually make money in their side gig spend time on it more than once a week. Managing your expectations is key.
2. Separating work from home gets challenging
If you have a day job and a side hustle, the lines between work and home can get muddled in a hurry, making it hard to disconnect from work and shift your focus to your home, yourself, and your loved ones. Keeping a structured schedule can help; limit your side hustle hours to certain, prescheduled times of day to prevent yourself from working 24/7 and missing out on the experiences that matter most to you. This can also help you truly relax during your resting time.
3. Your income might not be taxed
If you’re receiving 1099 (or independent contractor) pay, taxes are not withheld from your income. That means you’ll have to pay a percentage of that income to the IRS. A poor understanding of the tax implications of independent business ownership or 1099 income can lead to poor financial planning and even a financial crisis at the end of the year. Talk to an accountant early to ensure you reserve enough money in advance and pay your taxes in a timely fashion.
1. Finding legitimate opportunities can be tough.
Some freelance gigs or multilevel marketing companies claim to offer unlimited potential income (even six figures a year) to those who simply invest in the start-up package or pay to apply and then work an hour or two a week. It sounds too good to be true, and unfortunately, it is.
Because so many companies are promising something that doesn’t exist, thousands of people have invested in a potential side hustle and never made either less than promised or no profit at all. In some cases, consultants or independent business owners (or any number of terms used for those working in a multilevel marketing scheme) have lost life-savings or faced financial ruin as result.
As a general rule, a great side hustle should be well-known, have a good grade with the Better Business Bureau, and require little to no investment to begin. Protect yourself by doing your research prior to investing in a side hustle and making a decision based on well-researched facts.
Is a Side Hustle Right for You?
The verdict? Side hustles can be engaging, profitable, and flexible, but they can also make it hard to achieve work-life balance, result in life-altering back taxes, or put your livelihood at risk if you don’t do your research first and make informed decisions. The side hustle isn’t for everyone, but it can be a great way to grow your self-confidence and supplement your income.