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If income is tighter than you’d like, you might think of picking up a side hustle to add some cash to your bank account. There are lots of ways to take on work, from ride-sharing to consulting and a lot of gigs in between. However, before you leap into something new, consider the hidden or unexpected costs that can be associated with such a gig. Experts weigh in on eight ways your side hustle can actually cost you, so you can be prepared.
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Depending upon the type of side hustle, most of the time there are initial startup costs, says Kamyar Shah, chief fractional operating officer at Kamyar Shah business consulting. “Many incur thousands of dollars in debt especially if they wish to start a service business. The interest rates for paying back these debts are recurring expenses that may hinder the rapid growth of a business.”
Tools or Equipment
If your side hustle requires you to purchase any sort of tools or equipment, ranging from a new computer to inventory of any kind, or even a vehicle, you need to factor in these costs. “Even for the smallest of jobs, you can’t work without it,” says Amy Wampler, a financial consultant for Spartan Mechanical. “For example, if you’re a photographer you need a professional camera, lens, tripod, lighting equipment…Even a writer needs a laptop. This equipment will cost you money and repair and maintenance costs.”
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Cary Hastings, head of content at Bonsai says, “You’ll need to factor in travel expenses if you don’t work from home and have clients in your area,” especially if you’re not a remote worker.
Something many people might not think about when income from a side hustle starts rolling in is the taxes you have to pay on that money. As an employee, your employer withholds taxes from your paycheck. On your own, you must make quarterly tax payments on anything over $600 earned in one year, says Logan Allec, CPA and owner of the personal finance site Money Done Right. “If you don’t make your quarterly tax payments…you may be liable for an estimated tax penalty from the IRS and possibly your state tax department as well.”
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