Side hustles offer a sense of empowerment and control over finances at a time when it feels like the bills are getting away from us.
Before you take the plunge and venture into the new frontier of hustle, it’s important to plan ahead and consider the real cost of making a bit of extra cash.
Finder senior money editor Sarah Megginson said there were a few things to take stock of before starting a side hustle.
“There are some really good opportunities to make a bit of extra cash, but you have to be mindful of the fact that the ATO is going to want to tax you on any additional income,” she said.
Picking up a few trips with Uber might make around $500 a week, but factoring in the cost of petrol and taxes can mean you’re pocketing much less.
Selling pre-owned goods on Gumtree or Facebook Marketplace is generally not considered income producing assets and won’t require you to pay tax.
If you’re freelancing on Fiverr or Airtasker, you will need to plan ahead for tax time and factor in any service fees.
“Make sure you consider what your tax rate is and what you’re actually going to be making and set aside a little account so you’re not caught out at tax time,” Ms Megginson said.
For many, being time poor is the greatest hurdle when it comes to starting a side hustle.
Renting out a spare room on Airbnb or your car on Car Next Door are great ways to make an income with very little effort.
Ms Megginson said one of her friends spent two years house sitting and never paid a cent in rent.
Side hustles can be an empowering tool for individuals and families to take control of their finances, but stacking up the weekly workload can have other costs attached.
“I‘d say that there is a significant risk that taking on even more work to make ends meet is going to have a negative impact on mental health,” USED Business School senior lecturer James Donald said.
“If you’re working a full-time job plus working another job at night, how much time are you getting with your kids, with your partner?”
Dr Donald said working long hours, in some cases up to 80 hours a week, could lead to fatigue or even burnout over time.
Another challenge for side hustlers is being able to sustain themselves and continue to give “their best” at their regular job.
“It’s a real grey area,” Dr Donald said.
There is evidence that people are paying a “cognitive tax” trying to juggle multiple jobs that could lead to a slip in productivity.
However, there is some good news coming out of the US that shows doing meaningful part-time work can bring a sense of fulfilment that spills into a full-time role.
“If people are doing additional work that they find meaningful, interesting, it gives them a sense of ownership and control that can create a positive spillover into their performance at the full-time job,” Dr Donald said.
“So for some people, doing two jobs can have quite a positive effect.”
The reality is most people with side hustles are motivated primarily not by passion but a need for extra cash, Dr Donald said.
He said employers should be flexible and encourage open communication when employees say they are taking on extra work to pay the bills.
Asking for a pay rise is “absolutely the way to go” when it comes to employee wellbeing, according to Dr Donald.
“But in the economic environment that we’re in right now, people often feel very reluctant and very hesitant to have that type of conversation,” he said.
Originally published as How to make sure your side hustle works for you