The idea of making hundreds or even thousands of dollars on the side might sound really tempting to overworked employees burdened with student and housing debts. The internet makes it easy to find people who will pay for your particular skills, no matter how useless they might be in your day job. Most millennials engage in side hustles, hoping to earn extra cash to pay down debt, save for vacations and so on. However, are side hustles as lucrative as some people suggest? Can the gig economy really help you become debt-free in the coming five years? You will need time to make a side gig truly successful. If you dedicate yourself and know exactly what to do to increase income, then you will be able to make some actual money with a side hustle.
Only a Small Percentage of Side Hustlers Make More than $500
A report by Bankrate last year found that nearly 44 million Americans are engaged in side gigs or part-time jobs, however, only about 25 percent of this group actually made more than $500 per month. The amount of money you make will vary depending on the side gig you take on. If your side gig is a consultancy with a brand, then you will be able to make a good amount. If you choose to take a day trading for dummies course, the earnings may vary depending on the stock market, however, don’t expect to become debt-free by driving Ubers or taking on projects on Task Rabbit. A survey conducted by the finance company Earnest found that the median monthly income of an Uber driver is just $155. The median monthly income for Task Rabbit was just $110. Etsy, a website where people sell handcrafts, only had a median monthly income of $40. With Fiverr, the popular freelancing site, it’s $60.
Then There are the Fees (and Taxes)
Taking on a side gig isn’t actually cost-free. Take, for example, being a driver with Uber. The rideshare company doesn’t provide you with a vehicle. You will need to have your own vehicle, refuel it and maintain it for the job. Can that all be done with a median income less than $500? The story is largely similar when it comes to other jobs. If you are making arts and crafts to sell online, you will have to bear the overhead capital for raw material. You will lose some of your earnings to fees charged by the website or app that facilitates the trade. Then there’s another factor that part-timers rarely consider: self-employment tax. You can be subjected to this even if you don’t know what it is. The self-employment tax is federally charged and can be as much as 50 percent of the amount you earn.
How to Increase Your Earning Potential
Side hustles may not pay as much as you hoped for, but that doesn’t mean you shouldn’t engage in one. Choose a side gig carefully after considering all the fees and taxes. Have realistic expectations as to how much you can earn and do as much research as possible in advance.
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