- Do some self-discovery. Figure out what matters most to you.
- Research the market and learn what you can monetize.
- Do the math and invest accordingly.
Side hustles come in many forms, from part-time gig work to running an online store to hosting a podcast. This type of work has become increasingly accessible and widespread due in large part to technological innovation. Nearly half of workers in the U.S. earn extra income alongside their part time or full time jobs, according to a 2019 Bankrate survey of 2,550 adults. Millennials were among the most likely to take advantage of the gig economy, according to the survey. “Skills that are facilitated through technology that have opened up the most doors in terms of side hustles,” says Greg McBride, chief financial analyst at Bankrate.
It is also more important than ever to diversify your income, according to social media consultant and YouTuber Roberto Blake, who says he has four to six income streams at any given time. “If you can build multiple sources of income, you have a lot more stability and a lot more security,” says Mr. Blake, who receives ad revenue from his YouTube content, coaches clients on social media strategy and takes on brand sponsorships.
1. Figure out what matters most to you.
Before you do anything else, figure out what exactly you want to get out of your side hustle. Schedule time to sit down and think about it. This first step will likely be a process of self-discovery and you should be honest with yourself.
You might be looking for:
- Extra cash.
- Fulfillment you don’t get from your regular job.
- A fun way to spend your free time.
- Exploration of a career change.
- A way to phase out your retirement.
- A combination of some or all of the above.
If you have a well-paying day job that doesn’t excite you, you may be looking to take on a new project that keeps you energized, inspired and motivated.
If you are just looking for a quick way to make extra money, you may not want to spend a lot of time planning or investing in an original idea, and may be better suited to existing freelance or gig-work platforms. Even if this is the case, you should still choose work that you like and that aligns with your skill set.
Mr. Blake, who consults with businesses, creators and entrepreneurs about developing successful side hustles, says the ideal pursuit will fall into three buckets: It should be fulfilling, lucrative and add value to the world.
Remember that you don’t need to discount potential side hustles that require skills you don’t already have.
Mr. Blake says that you “have to realistically know where your skills and potential lie, but also, how do you learn and what you have the capacity to learn and improve upon,” says Mr. Blake. “You weren’t born knowing how to tie your shoes or drive a car, either.”
Just like you do with your day job, you should be willing to put in some time and effort into developing your skills, researching the market and planning a path. It is, after all, a hustle.
2. Do your research and establish what you can monetize.
You have figured out what you want to get out of your side hustle and identified the skills you have or believe you can learn. Now comes the practical part of the process: figuring out if you can actually get paid for what you want to do. Start by searching online to see if anyone has done it before you—the chances are, they have.
If you are hoping to create social-media content, for example, search platforms like YouTube, Instagram, Snapchat and Facebook. If you want to sell something, scour online marketplaces like Etsy, Amazon, Poshmark and Craigslist. Offering a service? Look at sites such as TaskRabbit. Converting your spare room? Try Airbnb. Compare prices, read reviews. Look at the most and least other people have ever earned from the job you are considering.
Questions to ask and answer during your research:
- Has anyone ever received money for this item or service?
- What are the average earnings for this type of work?
- What is the most anyone has ever earned from this pursuit and what level of skill did that person have?
- Is the market saturated with this type of work or is it rare?
- Is this type of work becoming more or less valuable?
If you have a vague idea of what you want to do but aren’t quite sure what to search for specifically, “think about a problem that you solved for yourself,” advises Mr. Blake. “And then consider the possibility that other people like you exist.”
If you do your market research, you will find there is very little that cannot be monetized. “I have seen people literally make money from sleeping during a [live stream],” says Mr. Blake.
3. Do the math and invest accordingly.
The key to having a successful and lucrative side hustle? Get on top of your financial planning well in advance. Failing to do so could cost you potential profit, savings opportunities and tax benefits.
Some side hustles require you to invest in equipment, services, office space or even employee payroll. Compare the cost of investing in the scheme with your earning potential by figuring out how much money you can realistically afford upfront and the estimated timeline for making a profit.
Mr. Blake, who has nearly half a million YouTube subscribers, realized early on that high-quality camera equipment would be an important investment for his business. “A lot of people would have taken the kind of money that I took to buy camera gear and they would have bought a down payment on a car,” he says. “I invested in my craft.”
Bankrate’s Mr. McBride recommends exploring several options before investing. Look into renting equipment or outsourcing services until you get your business up and running “to the point where you can justify a larger investment and owning equipment necessary to produce at a higher volume,” he says.
Think about the impact moonlighting will have on your income and tax bill. The more work you plan to take on, the more important it will be to meet with an accountant or financial adviser, says Mr. McBride.
Here are a few things you could ask financial planner about:
- Dedicated credit cards and/or bank accounts for business expenses.
- Budgeting money for self-employment taxes.
- Registering or incorporating your business.
- If, when, and how to invest money in equipment or services.
- Retirement savings options for freelancers.
- TED Talks: Looking for inspiration? Watch the world’s most creative, successful and innovative minds talk about their journeys, lessons learned, advice and struggles, for free. There are several talks dedicated specifically to the topic of starting a hustle.
- Local business groups: Swap ideas and struggles with real people in your neighborhood. Search for topics such as entrepreneurship and small business on Meetup or social networks like Facebook or Reddit, to find local groups near you. Be sure to take safety precautions if you are meeting people face-to-face.
- Existing freelance platforms: If you would rather rely on existing platforms for quick and easy jobs, freelance job sites like Fiverr and Upwork can connect you to jobs aligned with your skill set and interests. Gig work platforms tied to specific jobs like Uber, Lyft, TaskRabbit, Instacart offer longer-term contract work.
What to read next
What to do next
- Lower your tax bill by getting ahead of any tax risks you will face by adding self-employment earnings to your annual income.
- Listen to this episode of WSJ podcast ‘Your Money Briefing’ to learn more about the tax benefits that come with a side hustle.
- Need inspiration? Listen to co-host of The Breakfast Club Angela Yee’s interview with WSJ’s Veronica Dagher about how she manages her side hustles.
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8