Yahoo Finance How Side Hustles Can Actually Cost You Money
You hear the phrase " side hustle" a lot these days. But not so long ago, your side hustle was called having a part-time job. That's a pretty drab term, though, so it's easy to understand why some people would rather retire it. "Side hustle" evokes a can-do American entrepreneurial spirit.
And you may need that can-do American entrepreneurial spirit if you're taking on a side hustle. You might earn more money if you're supplementing your full-time job as a part-time fitness instructor, Uber driver or web designer, but if you aren't careful, you could theoretically lose money, too. Certainly, you could earn far less than you planned on. After all, as the saying goes, to make money, you have to spend money.
[See: A Guide to Launching Your Side Business.]
This isn't meant to discourage anyone from having a side hustle. But if you're thinking of becoming one of the 27.8 million Americans taking on part-time employment, according to numbers from the U.S. Bureau of Labor Statistics, you should budget for not just what you may bring in -- but what you may end up spending, as well.
You may have startup costs. For instance, you may need to be certified in the profession you're working in, says Donna Lubrano, an adjunct faculty member at Northeastern University College of Professional Studies in Boston.
When Lubrano was a real estate portfolio manager at Verizon, she had a side hustle as a fitness instructor and personal trainer, which she did from 1997 to 2008.
"I would teach at lunchtime in my local gym and then after work in various other locations," says Lubrano, who specialized in leading high-intensity workout sessions in the swimming pool (think: water calisthenics).
"Depending on how often and when you work, it could become expensive," she says of her side hustle, citing, among other things, the cost of becoming a certified fitness instructor, since clients tend to not want to pay for just anyone to train them. The initial startup costs for some fitness certifications can run $1,000 to $2,000, Lubrano says.
You may also need liability insurance, if it's feasible that a client or customer could be injured while you're on the job. Lubrano spent about $150 a year on hers. She also had to keep up her fitness education.
"You have to do re-certification courses every two years to maintain your credentials and upgrade your knowledge to follow trends," Lubrano says. "These courses can cost anywhere from $300 to $1,000 dollars themselves and may require you to go to conferences and sessions."
[See: 10 Money Leaks to Shut Down Now.]
There may be maintenance costs. With Uber, where you're driving people around in your own car, and Airbnb, where you're renting out your own home, you won't be doing either for long if you don't maintain you car and home. In other words, you're going to have to spend money to clean both, and with your car, the more successful you are and find yourself driving customers, the more wear and tear you'll put on your vehicle. So you may be visiting your mechanic more often than you would have otherwise.
There may be a lot of extra expenses. If you're dealing with the public, they will expect you to be on par with your competitors. For instance, if you're renting out your home, to keep your guests happy, "you have to provide modern conveniences, at a minimum, what they'd expect to find in a hotel -- Wi-Fi, a hair dryer, maybe a work desk, and all these things cost money," says Glenn Carter, who runs the sharing economy blog, TheCasualCapitalist.com.
"With Uber, fuel aside, a driver needs to be ready for anything," Carter says. "This includes any emergencies that may arise during a trip. Having an emergency kit is a must-have. Additionally, basic things like a dash-cam, air fresheners, car charger kits. Yes, these are simple things, but they still cost money."
And how are you going to advertise your side job? Let everyone know on social media? Or do you need a website?
"Any side job that involves a website will cost you money for domain registration, web hosting and possibly design services," says Lyn Alden, who is an engineer in Atlantic City, New Jersey, but as a side gig writes financial research and investment newsletters.
"There are free options [for websites], but if you're trying to look professional, it can cost some money," Alden says. "And the more successful your site becomes, the more you have to pay for reliable hosting."
Keep self-employment taxes in mind. You know you need to pay taxes on your side hustle. But it's easy to discount if you're getting excited by all the money you'll make with your new, extra job.
Allow Alden a moment to rain on your parade.
"Self-employment taxes are a surprise to a lot of people," she says. "The tax rate on my side gig is about 50 percent, because I pay a 28 percent federal tax rate, nearly 7 percent state taxes and 15 percent self-employment taxes. A full half of what I bring in finds its way to Uncle Sam."
[See: 9 Red Flags That Could Trigger a Tax Audit.]
And you'll spend energy. Sarah Lisovich is a senior editor and content strategist at Central Infusion Alliance Inc., a medical and surgical products company headquartered in Skokie, Illinois. But she also works part time as a restaurant server.
Lisovich never had to spend startup costs on her side hustle. She doesn't have to spend any money on maintenance costs. But she does say there's an expense, even as she earns her side income.
"The way I lose out on money is through a loss of productivity by virtue of never feeling entirely rested," Lisovich says. "The lack of sleep leaves me with brain fog, which can lead me to lose time, energy and money between work."
Lubrano, meanwhile, found herself often developing laryngitis when she was instructing clients over the loud splashing sounds of the swimming pool (breathing in chlorine also didn't help). Lubrano ultimately gave up her side hustle after developing a back injury. None of this is to say that a side hustle isn't worth your time and trouble, but immersing yourself into a side money-making project is often not as glamorous as it may seem. Odds are, if you're good at your side hustle -- and especially if you are very successful -- you will pay some sort of price.
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