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

Thanks to side hustles, you’ve never had more options for making money, and many of them give you the freedom to choose when and how much you work. For some people, they bring in enough money to eventually become full-time jobs.

These are the kind of 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 those costs when deciding if it’s worth it for you. Here are five expenses to watch out for when looking for a side hustle.

1. Taxes

Yes, you still owe Uncle Sam a portion of your income, even if you work for yourself. But since you don’t have a steady paycheck or an employer to withhold the money on your behalf, it’s up to you to set aside this money and send it to the government in a timely manner.

There are four estimated tax due dates during the year. These fall on April 15, June, September, and January of the following year. If any of these dates fall on a weekend or federal holiday, the deadline is the next business day.

You can use the government’s estimated tax worksheet to figure out how much you’ll have to pay each quarter. Consider opening a business bank account to hold these funds so you don’t accidentally spend them. Don’t forget about state estimated taxes, either.

2. Supplies

Some businesses require you to invest in materials up front. For example, if you are making some kind of craft to sell, you will first need the tools and supplies to make your product. If you hope to drive for a taxi company, you will need a suitable vehicle and auto insurance that meets this requirement.

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The exact cost will vary depending on the side hustle you choose and how quickly you plan to scale it. It’s best not to start too big in the beginning. 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 fee

Some popular side hustle apps, like dog walking apps, have a sign-up fee that you’ll have to pay when you sign up for the service. This is typically a one-time fee that you’ll pay to help the company cover the costs of running background checks and handling the administrative work that comes with adding you to the platform.

It may not be the be-all and end-all for you, but it’s still worth considering, especially if you’re not sure you’ll stick with the side hustle for the long haul. You may be better off looking for something you can dive right into without the expense.

4. Sales costs

If you plan to sell items through an online marketplace, be prepared for the marketplace to take a cut of each sale. Check the 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 the consumer, but you can avoid this cost by adjusting your selling price accordingly.

5. Advertising

Advertising can help you get your product or service out there and attract new customers. But online advertising costs money. If you go this route, you should set aside a certain portion of your monthly income for advertising. You can also explore free advertising services, such as using social media or offering referral bonuses to existing customers if they invite their friends to check out your business.

This is probably not a complete list of expenses that come with your side hustle. See if you can brainstorm additional expenses that you may incur and then determine if those expenses are worth the potential profit. If not, you may want to consider other options.

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