When is a Side Hustle Really Worth it?

By Ryan Goldsman, CFP®, PAIP®

            Side hustles often sound attractive to those who are unhappy with a part of their lives. The extra money is definitely appealing to those facing a cash crunch, or may have a few weddings to attend in the next year, but it’s not always that clearcut.

            First off, when taking on a side gig, it’s important to have a clear goal in mind. If not, then the side gig can too easily become one’s full-time job or permanent part-time job. In other cases, it’s hard to give up the income once a person grows to expect it.

            Of course, for those who have no problems doing things like this on an ongoing basis, there are many factors to consider. For starters, time spent earning a wage is time away from one’s family or favorite pastimes. In addition, there are other expenses to consider.

            Depending on the side hustle, there are often additional costs. To drive for Uber as an example, one must have a vehicle of some sort. This means higher insurance premiums, additional wear and tear on one’s car, and a depreciating asset that, believe it or not, will depreciate even faster.

            Finally, after those factors are considered and an income is earned, there are taxes to be paid. When compared to one’s first job, the earnings from a side hustle will often be taxed at a higher marginal rate of tax, and therefore leave you with less after-tax money. The earnings from a side hustle are in many cases not worth the extra time spent carrying out the tasks, especially if it’s not an enjoyable activity.

            For those who are studying full-time and looking for part-time spending money, then a “gig” could very well be worth it. For those with a full-time job however, the remuneration is rarely worth it – especially after considering the actual costs and the opportunity costs.