8 Mistakes To Avoid When Working Your Side Gig
Side hustles are more popular than ever.
With the ability to download an app and start working within a day or two, the gig economy has changed the traditional work landscape. You can earn hundreds or even thousands of dollars on the side, while still controlling your schedule.
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But side hustles can quickly turn into nightmares if you don’t have a plan in place. From burnout, to wasting your extra income, to dealing with the IRS, there are plenty of things that can make your side hustle miserable.
Here are eight mistakes to avoid when working your side job. And here are five side gigs to avoid.
Poor Scheduling
Having a side hustle can help you quickly increase your income, but it won’t be much help if you run yourself ragged by working odd hours or burning yourself out due to poor scheduling. When choosing a side hustle, make sure to research how much time it actually takes to make money and what kind of hours it requires.
Take inventory of your current schedule, including your free time, to ensure that you can add a few extra hours per week without stressing out. Focus on side jobs that have flexible work hours so you can control your schedule. This will help you enjoy earning extra money instead of hating it.
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Investing Too Much Cash Up Front
Some side gigs aren’t free to start and require up-front investments. Whether you are a content creator and need filming equipment or you want to drive for a rideshare company and are considering upgrading your car, you might need to make an investment to start earning money.
But if you don’t calculate how much you’ll be making and end up investing too much money up front, you might end up losing money in the long run. It’s important to understand what the income potential is before making a significant investment.
For example: If you upgrade your car to meet the minimum requirements for driving for Uber or Lyft, you might end up paying thousands of dollars more than keeping your current car. And if you end up giving up after a few months, you will be stuck with a higher vehicle cost without the income.
Taking Too Many Low-Paying Gigs
One of the best ways to start earning side money instantly is to join a freelancers marketplace such as Fiverr or Upwork. You can list your services and start taking on clients without much upfront effort.
But if you try to compete only on price and take on too many low-paying clients, you might end up working a lot of hours but not making much in return. While it may be tempting to undercut competitor prices to get more clients, you can end up hating your side gig and giving up if you don’t make enough to justify the time and effort spent.
Instead of taking a bunch of low-paying clients, focus on building your portfolio by taking on one or two low-paying clients to start. Do your best work and get positive reviews and testimonials. Then you can increase your prices as you build out a quality portfolio to showcase to new potential clients.
This will allow you to earn a decent income on the side without devaluing your time.
Poor Business Accounting
Let’s face it: Accounting isn’t all that fun. But if you are earning money on the side, it’s important to keep track of your income and expenses closely, as you are now a business owner. You will need to not only track your business income and expenses but report on them separately when you file your taxes.
Using accounting software like Quickbooks can make this process much easier. If you don’t feel comfortable with the process of business accounting, it may be wise to hire a licensed tax professional to help you set up an accounting system.
Nothing is worse than getting a letter from the IRS saying you owe back taxes, so make sure you get your accounting system set up before going too far with your side hustle.
Not Budgeting Your Extra Income
Side gig income is amazing. You are no longer capped by the hourly rate or salary that you earn in your day job and you can earn money on the side, sometimes hundreds of dollars per month. But, if you don’t have a plan for that extra money, it can easily disappear, leaving you with nothing to show for the extra hard work you are putting in.
Before you start earning, make a plan for the funds you’ll start bringing in. If you are paying off debt or stacking your savings, make sure most of your side income goes toward those purposes.
Once you actually make money, it may be wise to open a separate savings account to put the extra cash in. This keeps it out of your regular checking account and helps you avoid the temptation to spend it all.
Violating Rules Set By Your Main Employer
While side gigs can help you hit your financial goals more quickly, some employers actually ban employees from taking side jobs. This can be known as an “exclusivity clause” or “moonlighting” — basically the employment contract you sign might prevent you from working another job.
These exclusivity clauses are becoming more rare, but make sure to talk with your HR department before taking on any side work. If you breach your employment contract with a side hustle, you could risk losing your main job.
If you are a contractor (not a full-time employee), you also might be under a non-compete clause, which prevents you from doing any business with competitors. Sometimes these clauses can last years after you separate from a company, so make sure you always read the fine print of any employment contract before signing.
Forgetting To Separate Business and Personal Money
While it might feel amazing to see the dollars piling up in your bank account, it’s important (for tax purposes) to keep your side hustle income in a separate business bank account. Not only will this help you keep your business accounting clean, but you will avoid forgetting to report the income properly come tax time.
Any good accountant will tell you to open a business bank account before you get your first side hustle payment, so you can keep everything separate from the beginning. If you happen to deposit side money into your regular bank account, you will need to track it in your accounting software to ensure everything is reported properly.
Again, this is where a licensed tax professional can help you set up an accounting system that keeps the IRS off your back.
Getting Burned Out
While side gig income can be life-changing, it also can drive you to work too hard. If you work a regular 40-hour-per-week job and then work extra on nights and weekends, you can quickly burn out.
In addition to setting up an appropriate schedule, you also should limit your side hustle activity to things that you enjoy. This can make it easier to continue earning money on the side without hating every second of it.
Protecting your mental health while building a business on the side is important for long-term success and short-term stress.
Bottom Line
Earning money on the side can help you pay off debt, invest more and even leave your day job sooner. But if you don’t have a plan in place, it can quickly become a nightmare. Budgeting your income properly, keeping good financial records and working side jobs you enjoy will help you be more successful overall.
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This article originally appeared on GOBankingRates.com: 8 Mistakes To Avoid When Working Your Side Gig
