Thinking about starting a side hustle to earn a little extra cash, but wondering what you need before you get started? We sat down with Azucena Gomez Victoria, a financial educator, to get an overview of the most important points to consider.
What reason do you have for starting a side hustle?
"We need to take a proactive approach when we are doing a side hustle or when we are wanting to do or start a new business," Gomez Victoria says. "Why am I doing it? What's the reason for that extra income that I'm looking for? Is it to go on vacation? Is it to save money for my retirement? Is it to save money for my kid's college? What's the reason? If you identify the reason, you're going to be able to administer that cash in a better way for you and your family. If you have a little extra, let's say you make, you know, two, $3,000 extra because of your side hustle and that money was meant to go towards rent, then all that you use is the part you need for rent, the rest say to put it aside. Don't use it to go out, you know, in the night to go out to a restaurant or to get an extra ice cream. No, that's not its purpose. Not that you can't do it, but that's not the purpose of that money."
Points to consider before you start that side job
"First of all, is the investment. What type of investment is going to go into this side hustle? Will it be a one-time investment? Will it be weekly? Will it be monthly investment? And how much of it. Right? How much of it and for how long? That's number one.
"Number two, it's time. How much time do I need to dedicate to this side hustle in order for it to be beneficial to me or in order for it to be successful? Do I do it part-time? What do I do? What time do I have that time also? In how much time do I recuperate my investment and I actually start to see profits?
"Number three is having the need. What is it that I am going to offer? What is the service or what is the product that I'm going to be offering? Is it you know, is there a need for it? Is there a demand? How much of it when will I start selling my first product? So when will I start giving my first services?
"And then comes the knowledge. Knowledge is so important because I need to know about the business. How much do I know about the business? Do I need to prepare myself before I actually start the business? Meaning, do I need licenses? Do I need permits? Do I need some type of protection for the type of business that I am doing? Do I need accounting? Do I need to set my finances in order? In order, you know, so that my side hustle works for me? What is that? There's a lot of needs, you know, there's a lot of knowledge that we need to have before we actually step into that home.
Know the tax implications
"I'm not a tax adviser, right? But we all know that there's always a tax effect. Every time we make money, we're going to be taxed on it. So we need to know before going into this side hustle, how much more income will I be declaring and how will I be declaring it right on my own, am I on a W-2? Am I on a 1099? Can I deduct some of the some of the investments that I'm putting into my side hustle?"
Make sure you have appropriate insurance coverage
"You know, I do see a lot of people nowadays renting their home for parties or even just their pool ride just for an afternoon or an evening. You have to be careful with the. I always think that we all should be very careful when we bring people onto our property. You need to know that if it's insured, what type of insurance, what type of protection do you need? Because you can get in a lot of trouble. You don't know if there could be an accident at a property. How will I cover that? Right. So you need to be very well advised as to how to be prepared in case of an accident happens at your property."
Consider what you'll have to give up
"We all want to have a side hustle. We all want to have extra income. You know, we want that benefit of if I know how to do something, you know, I want extra money. But we really do have to think how much of my time is going into my side hustle or this startup that I want to get going, right? Because we can always get back money. If I invested and you know, I lost two, $3,000. Well, that's money. But how much time did we spend in this time? In this hustle, right side hustle? How much time did I spend putting it together or trying to make it work? We can always get back money, but we can never get back time. So you really have to see whether it's worth it or not. That's why we need to do our homework and really look into these points that we've gone over today so that you determine whether it's worth your time."
