Getting a second job is a great way to increase your monthly cash flow so you can attack your credit cards, student loans or other debts at a faster pace. Getting a side venture off the ground typically involves some trial and error but some mistakes can be worse than others. If you’re in the process of ramping up your first side hustle, watch out for these five pitfalls.
1. Failing to set goals
When you’re stuck in debt, you may feel like you’d be willing to do anything to get rid of it. While there’s nothing wrong with starting a second job for the sole purpose of paying it off you need to be more specific with your intentions. Just saying that you want to make extra money doing X, Y or Z isn’t going to get you closer to debt freedom.
As you’re mapping out your second job plans, you need to gauge what kind of return you stand to see on your investment of time so you don’t have unrealistic expectations. Someone who’s able to dedicate 10 or 20 hours a week to side hustling, for instance, is likely to see their efforts pay off faster than someone who’s only got two or three hours to spare.
Before you get started, take a look at your schedule to see how much time you can dedicate to your side hustle and how much money you want it to generate. That way, you’ll be able to measure your progress and it’s much easier to stay motivated when you have specific targets to work towards on a weekly or monthly basis.
2. Wasting time on the wrong things
Thanks to the wealth of information that’s available on the Internet, it’s easy to spend hours researching how to start a side hustle but none of that means much unless you actually jump in and do it at some point. Procrastinating, whether it’s because you’re afraid to take the leap or you just don’t think you have what it takes to be successful, is a surefire way to tank your side hustle before it even gets out of the gate.
Breaking your tasks down into smaller bites and setting a daily time limit for working on them helps you stay on track so you’re not just spinning your wheels. It’s also important to avoid getting bogged down in too many details. If your side hustle involves setting up a website, for example, don’t waste time searching for the perfect template. Go with something basic to get it up and running first and worry about customizing it later.
3. Undervaluing yourself
If your side hustle involves offering a particular skill or service, one of the very worst things you can do is sell yourself short in terms of your rates. Whether it’s writing content for websites or running errands for the little old lady who lives down the street, you don’t want to accept a wage that causes you to devalue your time.
When you’re not sure how to go about setting your rates, checking out what other people are charging who are doing something similar can give you a good starting point. For example, if you’re trying to snag a copywriting gig, you might try scoping out the websites of established freelancers to see what their fee schedule looks like. If that doesn’t turn up anything, you could also try online forums for freelancers to get a feel for what others are charging.
If you’re planning to do something offline, like cleaning houses, call around to a few local businesses that provide the same kind of service to see what they charge. You can scale your rates up or down, based on your experience. The point is to set your fee at a number that’s fair to your clients without making you feel like you’re giving away your time.
4. Not treating it like a business
Once your side hustle starts to pick up steam and you’ve got money coming in, you need to have a plan for what to do with it. The main issue here is making sure that you’re not overlooking your tax obligations since the IRS is likely to consider your side gig a business if it’s turning a profit.
Setting up a separate bank account that you use to deposit your side income and pay any related expenses is a smart move since you’ll need to be able to document both of these things properly for tax purposes. If you’re working as an independent contractor, you should get a 1099 at the end of the year showing what you’ve made but it’s always a good idea to keep your own records in case something gets lost in the mail.
Money earned from self-employment is considered taxable once it passes the $400 mark for the year. You’d have to pay both regular income tax and self-employment tax on your business income so that’s something you’d have to plan ahead for to avoid a huge tax bill at the end of the year.
5. Failing to maintain balance
When you’re starting a side hustle with the goal of getting out of debt, you may feel like you need to commit as much of your free time to it as possible. The problem with that is that it can leave you feeling burned out if you’re not setting aside any time for yourself, friends or family.
Creating some boundaries at the outset ensures that your side hustle doesn’t completely take over your life. Setting aside blocks of time for working on it or planning to incorporate days off into your schedule means you won’t end up resenting the hours you’re spending on it in the first place.