No Such Thing as a Free Lunch – The Real Cost of Starting a Side Hustle

Many people believe that a side hustle can be done on the cheap, but nothing is further from the truth. Building a successful side-hustle has costs you should take into consideration before starting—not just financial expenses, but also the personal and mental price that many don’t realize they will be paying.

earn money

The Statistics of the American Side Hustle

Anywhere from 34% to 45% of Americans have a legal side hustle. A side hustle will include a small startup, part-time work, freelancing gigs or any other paid role outside of your primary job.

Most jobs aren’t paying enough for the extras that people want, so they turn to jobs on the side to make up the difference. In some cases, people are hoping to eventually grow the side hustle big enough to drop their 9-to-5 and start working for themselves. This is the American Dream, right?

According to Bankrate’s survey:

  • 34% have a side hustle for extra disposable income
  • 30% pick up a side hustle to help pay for regular living expenses
  • 27% get a side hustle in an attempt to grow their savings

These side hustles aren’t often as lucrative as people might think. The same survey found that 73% of those with a side hustle were making less than $500 per month. Only 3% said they made $1,501-$2,000 per month and 6% said they were averaging over $2,000 per month with a side hustle.

When you take into account the costs of a side hustle, that extra money really starts to look low.

Understanding these costs may help you find ways to trim down your financial expenses for startup and reduce the impact it has on your personal life and mental health.

Counting the Costs of a Side Hustle

Everything comes with a price. While some are unavoidable, others can be reduced if you are careful about incurring them from the very start. You need to know the difference between costs that are crucial to success and the costs that are too high to pay.

Let’s break down the costs of a side hustle.

Financial Costs

In some cases, people will choose a third party that will do all the hosting and marketing for them, but in those cases, you are subject to the whims of their pricing, rules and platform. When you build your own side hustle, you will have much more freedom, but you will also incur all the marketing and production costs of running a business.

Here are some of the typical financial expenses of a side hustle.

Website and Hosting: Starting with an online store is the best way to market and sell your product or service without a lot of overhead. However, you will still have expenses associated with your digital presence. You will need to pay a web designer to create a site and then pay monthly for hosting. Some web designers will even try to charge monthly for upkeep and you won’t have control to make changes on your own.

Choose a designer with a solid portfolio from your industry and plenty of references—don’t try to go cheap or you will get what you pay for. This will likely be one of the biggest upfront expenses for your side hustle.

Branding and Logo Design: Before you get the ball rolling on the site design, you will need to know what you are going for with your aesthetic and voice. The direction of your branding is often driven by your logo design and brand style guide.

Create a custom logo design that aligns with your goals as a brand and appeals to your target audience. When you’ve settled on the right design, develop a style guide that talks about how to use the colors, fonts and logo in a consistent way for brand cohesion across all spaces.

After you’ve determined your direction, it’s time to apply that design to the website strategy to create the right feel for your virtual space.

Promotions and Marketing: How are you going to get your brand out there and attract the right audience? There are just too many brands out there to build a new one and expect to gain attention without marketing.

Word-of-mouth marketing is going to be your best friend (it’s free!), but it can also be unpredictable.

Social media ads and search engine PPC (pay per click) spots are great ways for online brands to advertise. You will be able to target very specific customer groups to pinpoint the audience most likely to want what you are selling. Email marketing is another way to build and maintain solid growth.

Product Costs and Packaging: If you are selling a physical good, you are going to have costs upfront in creating prototypes and then producing that good. This expense might be more expected, but it can still be higher than you might think.

Don’t cut corners and end up with cheap, poor-quality goods. Choosing the right manufacturing party is a crucial step in a successful venture.

Insurance and Licensing: Know the laws when it comes to building a side hustle within your industry. There are often licenses, insurance policies and business structures you need before you are legally in the right place to operate your business.

If you cut corners here, you could quickly find yourself in a lot of legal (and financial) trouble. This will include things like:

  • Choosing a business structure
  • Registering your business name
  • Applying for a tax ID
  • Getting appropriate permits and licenses
  • Choosing the right business insurance

Taxes: You don’t want to build a side hustle and fail to pay taxes—this can certainly bite you later! But, self-employment taxes are very high. It is extremely important you get a separate bank account for your business so you don’t mix up your finances. This will be extremely useful come tax time. You might experience a loss the first year or two when you factor in all the expenses you are allowed to deduct.

Personal Costs

Aside from the money, there are other costs to factor in. Your personal life is going to be impacted by your choice to start up a side hustle.

Time: There is only so much time in the day. A side hustle is going to take away from the time you have to do the things you love. However, if you don’t have money to fund the things you love, then the time may not be worth much to you. You have to strike the right balance between time off and time spent accumulating money.

Budgeting your time and money can be a huge help in managing these areas so you aren’t completely overstretched in one area.

Energy: You will only have so much energy in a given day. If your day job is draining and your side hustle is—well—a hustle, then you may be too drained to do much else (even if you have the time for it).

You might find yourself making poor choices on spending money, eating unhealthy foods or skipping workouts because you are just too exhausted. In some cases, you might find low energy results in negative lifestyle habits, like extensively scrolling social media, abusing substances or binge-watching TV in a subconscious attempt to escape.

Relationships: Your relationships may suffer as a result of intense working hours. People you love and care about need your time and attention as well. It may be the right choice for a short period of transition time, but a long-term stretch might be too much to handle.

If your side hustle takes up too much time, you will not be there for the people you care about.

Mental Costs

There are many mental costs to a side hustle. People often don’t realize how their mental health might be impacted and how much this is going to matter in the long-term direction of their business. When you work many hours, you may find that you struggle with:

  • Low Motivation
  • Anxiety
  • Depression
  • Acute Prolonged Stress
  • Burnout

It’s extremely important to know when to push hard and when to take a break. You can only do so much before your mind and body call it quits. Push too hard and you will find that you become ill or have a breakdown.

You will need to learn how to balance your work with your life so you can have both if you are going to pursue a side hustle. Counting the costs will help you make the right choice in your journey.

About Carson Derrow

My name is Carson Derrow I'm an entrepreneur, professional blogger, and marketer from Arkansas. I've been writing for startups and small businesses since 2012. I share the latest business news, tools, resources, and marketing tips to help startups and small businesses to grow their business.