When your income is limited, scaling back your budget can only get you so far. The good news: Cutting back on spending isn’t the only way to improve your finances. You can potentially make big changes by finding a new source of income.
With the right side gig, putting in just a few extra hours of work per week could be enough to help you cover major bills and build up your savings. Follow these tips to ensure your venture is successful.
How to successfully make money on the side
Finding the right side gig is a bit of an art. You’ll need to figure out when you have free time, which skills people are willing to pay you for, and how much money you can realistically make once all of your personal expenses are covered. Here’s what you should consider:
1. Look beyond gig websites
There are plenty of websites where you can list your services for hire, such as Lyft, Task Rabbit, and Fiverr, but they don’t always pay well. According to a study from Human Rights Watch, people who used gig work platforms earned less than minimum wage after covering all of their work-related expenses.
So if you want to increase your earning power with a side job, you might want to skip the gig-work platform and look for a part-time job listing, or see if you can provide products or services directly to people you know.
2. Be realistic about your schedule
Take a look at your current schedule, including the time you devote to work and non-work responsibilities. Then list out the times you’re available for a side gig. Keep in mind that you might need to factor in commute times when determining your availability.
If you only have a few hours free here and there, you might have to look for a way to make money online instead of going somewhere in person. However, if you work remotely, you could potentially do two jobs at once. For example, if you work from home as a virtual assistant (VA), you may be able to house sit or pet sit while doing your VA duties.
3. Keep your tasks organized
Taking on a second job can mean having twice as many work responsibilities to keep track of. If you’re not organized, things can spiral out of control quickly. Here are a few tips for staying on top of your main job and your side gig at the same time:
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Block off time in your schedule for each job. Using a color-coded calendar can help.
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Take time each Sunday to review your schedule for the upcoming week.
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Create to-do lists at the beginning of each day and list items in order of urgency.
You may also find that you have less time for basic tasks like cooking meals or working out. If you want to make sure they get done, add them to your schedule. Just be willing to try time-saving approaches, such as batch cooking or socializing with friends by working out together.
4. Plan for taxes
If your side gig is freelance or contract work, and you earn at least $400 a year after covering all your business expenses, you’ll have to pay self-employment taxes.
Fortunately, getting prepared to file your business taxes is easier than you might think. You’ll need to keep a list of your business expenses and income, along with receipts, so you can report the information on a Schedule C and Form 1040 when you file your taxes.
You can use a program such as QuickBooks to help you stay organized, or simply start a spreadsheet so you have a complete list of income and expenses to refer to when it’s time to file.
Read more: How do self-employment taxes work? A step-by-step guide.
5. Avoid burnout
Burnout is a major problem for people who take on side hustles. But some side gigs put you at higher risk than others. According to a survey from SideHustle.com, these are the side hustles and habits that are most likely to lead to burnout:
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Doing gig work, such as ridesharing or deliveries
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Working more than eight hours a week at side gigs
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Having more than two side hustles
What helps people cope? According to that same survey, many side hustlers (56%) feel they just have to push through. But others get relief from taking mental health days (48%), sleeping or napping (39%), and exercising (37%).
After a long week of working multiple jobs, you might be tempted to blow your money on guilty pleasures like meal deliveries or online shopping. But impulsive spending can quickly undo all of your hard work.
Instead, take a few steps to ensure your extra funds go toward helping improve your financial situation. One of the easiest ways to do that is to set up an automatic deposit to the account where you want your money to go.
For example, if you want to increase your emergency savings and earn $200 a week from your side gig, set up an automatic contribution of $200 per week to a high-yield savings account (HYSA). If you want to pay off your credit card, increase your automatic monthly payment to the card.
Read more: Should you automate your savings? Pros and cons to consider first.
Do you need an LLC as a side hustler?
If you start a side gig, there’s no need to form a limited liability company (LLC). In fact, you can simply operate as a “sole proprietorship,” or a business owned and run by an individual, without doing any business registration. And as a sole proprietor, you can file your taxes using your Social Security number.
With that said, you may eventually want to take the extra steps to form an LLC. The main benefit of being an LLC is that it prevents anyone from going after your personal assets if something goes wrong with your business.
Read more: Do I need a business bank account if I’m self-employed?