With food prices and rent costs continuing to increase, thanks to rampant inflation, many are looking for ways to increase their income streams. A side hustle can offer you extra cash each month, providing additional money by doing occasional tasks or taking on regular freelance work.
Roughly 31% of Americans have a side hustle in 2022 -- and 41% of those with a side hustle rely on this income to pay everyday expenses, according to a June Bankrate survey. (Bankrate is owned by the same parent company as CNET.)
A side hustle can make life a little more comfortable, nudge you closer to achieving a particular financial goal or help you pay the bills as inflation persists. But before you get started, it's important to consider how this extra work will impact your time, job security, overall goals and your taxes.
Here are some tips to get the most out of your side gig. For more ways to stretch your dollar a little further, check out these six options for extra money each month. Plus, learn how one woman turned her side hustle into a six-figure business.
Be realistic about how much time you have
A side hustle can be a hefty responsibility. Even if the gig requires only a modest time commitment, that's on top of your full-time job -- plus other commitments and relationships that require your time.
That means your side hustle work may spill into nights and weekends, or times you might otherwise recharge, connect with friends and family or pursue hobbies.
It's important to prioritize your mental health and your full-time job over any side endeavors, and set clear boundaries of time and effort before embarking on your side hustle journey.
Forest McCall, a marketing manager who side hustles by running a personal finance blog, does not stick to a set number of hours per week, but rather bases his workload on how he's feeling. "Some weeks I may feel more refreshed than others, so my side hustle hours vary week to week, for an average of 15 hours per week."
Set clear boundaries and hours before committing to a new venture, especially one where clients are involved. If your extra work is making it impossible to evenly balance your time and obligations, don't be afraid to pause and give yourself some time off. Just be sure to communicate your hiatus to your second boss or clientele.
Find work through your network and side hustle apps
No matter which industry your side hustle is in, finding and building your clientele is paramount. If you're side hustling in an industry you're familiar with, leverage your existing connections by sending an introductory email or a LinkedIn InMail (as long as you're complying with your primary job's rules, of course). This can help you find business opportunities and browse available freelance job listings.
Don't be afraid to let relatives or friends know about your side gig, either. Even if they're unable to hire you, they may offer you some valuable advice as you start out, or be willing to lend you helpful materials. And don't underestimate the power of word of mouth.
Lastly, make sure to exhaust the apps. So many side hustles, from tutoring to photography and food delivery, have corresponding apps designed to simplify the process and connect providers to clients. Well-known side hustle apps include DoorDash, Uber and Rover, but search around to find something that matches you. For example, FlexJobs is a great app for creative freelancers. Remember, this is an investment of time and effort -- and sometimes tools and supplies -- and you owe it to yourself to make full use of the connections and resources you already have.
Give your money a mission
Having a purpose will generate energy for your side hustle. "Side hustles can be extremely helpful to help meet your financial and life goals," said McCall. A concrete savings goal, which could be a monthly entertainment budget or a home down payment, will help you stay engaged.
A side hustle can offer you more financial flexibility to pay down debt, plan for retirement and explore other ways to invest and grow your money -- but it can also help you explore roles in different industries and even lead you to a new passion.
Sometimes, a side hustle can evolve into a lucrative main hustle. "My side hustle has completely changed my life and I am so happy that I started it." said McCall. "I was able to use the skills from my education and career to launch my side hustle just over two years ago, and it has been tremendous."
Keep an eye out for noncompete clauses
If there's considerable overlap or correlation between the industry of your side hustle and your primary job, make sure it doesn't conflict with your current employment agreement. Some jobs may require you to sign noncompete clauses, which prohibit you from working in an industry that could be considered competition with your primary employer. In this case, it may be better to seek extra work in a different industry -- for example tutoring part-time if you work as a sales representative full-time.
For more guidance, have a conversation with your manager or human resources department regarding your side gig. Some companies may require approving any side gigs you take on, while others may be more lax. Some simple research and transparent communication can save you a lot of complications and difficulty.
Important: A side hustle will affect your taxes
One crucial thing to consider is that any extra income you pick up could make your taxes more complicated. "There are many life changes that can impact your income tax return -- but none are bigger than part-time or side employment. It's your biggest single tax return change," said Mark Steber, chief tax information officer at Jackson Hewitt.
One of these changes includes making estimated state and federal tax payments throughout the year to avoid getting hit with a huge tax bill all at once -- and to avoid paying penalty fees for not paying taxes throughout the year. You'll typically receive 1099-NEC or 1099-MISC forms from companies you side hustle for, but even if you don't, you'll need to report your side hustle income when filing your taxes on IRS Schedule C, Profit or Loss from Business.
That noted, your side hustle may also make you eligible for tax deductions that could ultimately lower your tax bill. Working with a qualified CPA or using tax software designed for freelancers could help maximize your deductions. "The IRS is not in the business of making sure you get all the business deductions and credits you qualify for. If you miss one, then you're likely to pay more," Steber said.
For more tips, check out the best ways to save money on food, gas and travel. To grow your money as interest rates begin to rise, find out if I bonds are the best way to boost your savings.