5 Hidden Side Hustle Costs That Could Take a Huge Bite Out of Your Profits

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Side hustles are a great way to grow your wealth, but they’re usually not without cost. Here are five side hustle expenses you may not have considered. [[{“value”:”

Thanks to side hustles, you’ve never had more options to make money, and many of them give you the freedom to choose when and how much you’d like to work. For some people, they pull in enough cash to eventually turn into full-time jobs.

These are the success stories we sometimes read about. But the reality is that starting a side hustle can come with significant costs, and it’s important to weigh these costs when deciding whether it’s worth it for you. Here are five expenses to be aware of when searching for a side hustle.

1. Taxes

Yes, you still owe Uncle Sam a piece of your earnings even when you’re working for yourself. But since you don’t have a steady paycheck or an employer to withhold the funds on your behalf, it falls to you to set this money aside and forward it to the government on time.

There are four estimated tax due dates throughout the year. They fall on the 15th of April, June, September, and January of the following year. If any one of those dates falls on a weekend or a federal holiday, the deadline is the next business day.

You can use the government’s Estimated Tax Worksheet to figure out how much to pay in quarterly. Consider opening a business bank account to keep these funds in so you don’t accidentally spend them. Don’t forget about state estimated taxes, as well.

2. Supplies

Some businesses require you to invest in materials upfront. For example, if you’re making some sort of craft to sell, you’ll need the tools and supplies necessary to make your product first. If you hope to drive for a ride-hailing company, you’ll need a suitable vehicle and an auto insurance policy that accommodates this.

Exact costs vary depending on the side hustle you choose and how quickly you plan to scale it. It’s best not to go too big at first. Start small and as you generate a profit, you can put some of the proceeds back into your business to grow it further.

3. Application fees

Some popular side hustle apps, like dog-walking apps, have an application fee you must pay when you apply to join the service. These are usually one-time charges you must pay to help the company cover the cost of running background checks and taking care of the administrative work associated with adding you to the platform.

It may not be make-or-break for you, but it’s still worth considering, especially if you aren’t sure if you’ll stick with the side hustle for long. You might prefer to look for something you can dive into right away without these costs.

4. Sales fees

If you plan to sell items through an online marketplace, you must prepare for the marketplace to take a cut of each sale. Check its list of fees before you join the platform so you understand how this works.

You may also have to pay to ship the product to consumers. However, you can get around these costs by adjusting your sale price accordingly.

5. Advertising

Advertising can help you get the word out about your product or service and help you attract new customers. But online advertising costs money. If you go this route, you’ll need to budget a certain portion of your monthly income for advertising. Alternatively, you could explore free advertising services, like using social media or offering referral bonuses to existing customers if they invite their friends to check out your business.

This likely isn’t a comprehensive list of costs associated with your side hustle. See if you can brainstorm any additional costs you might incur and then decide whether those expenses are worth the potential profits. If not, you may want to explore some other options.

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