Gig Jobs and Side Hustles: Earning for Saving

A delivery man making a food delivery.

According to some estimates, more than 11 million people leverage gig jobs and "side hustles" to earn money in addition to a regular job. Whether saving for a goal like a downpayment on a home, building a long-term emergency fund, or working to reduce debt, many find independent work a great way to boost income and reach their financial goals faster. So, could working in the gig economy or starting a side hustle be for you?

Understanding the Gig Economy

The gig economy refers to the growing trend of freelance, short-term, and contract work, often facilitated by online platforms and apps. In the gig economy, workers are typically hired for specific tasks or projects and have the flexibility to set their own hours.

Some common examples of gig work include:

  • Driving for ride-sharing services like Uber or Lyft.
  • Working for delivery services like Instacart or DoorDash.
  • Finding freelance work through platforms like Upwork or Fiverr.

The gig economy offers several advantages for those looking to earn extra money. The work is often flexible and has low barriers to entry. So, for many, these jobs are a path to earning extra money, even for those with limited experience or specialized skills.

Starting a Side Hustle

Another way to earn extra money for your savings goals is to start a side hustle – a small business or freelance venture that you operate in addition to your primary job. Unlike gig work, which typically involves working for an existing platform or company, a side hustle allows you to be your own boss and control your income potential.

Some popular side hustle ideas include:

  • Selling products online through platforms like Etsy or eBay.
  • Offering freelance services like writing, graphic design, or web development.
  • Starting a blog or YouTube channel and monetizing through advertising or sponsorships.
  • Providing pet-sitting, house-sitting, or cleaning services in your local area.
  • Teaching online courses or tutoring in a subject you're knowledgeable about.

For many, starting a side hustle can be a great way to turn a hobby or passion into a profitable venture. It also offers the potential for long-term growth as they continue to expand their business over time.

However, starting a side hustle also requires significant time and effort, especially in the beginning - and success is far from certain. You must be disciplined and motivated to work on your business consistently, even when busy with other responsibilities.

Tips for Success

Whether you're participating in the gig economy or starting a side hustle, several key strategies can help you maximize your earnings and reach your savings goals faster:

  • Set clear financial goals and track your progress regularly. Having a specific target in mind will help you stay motivated and make informed decisions about which opportunities to pursue.
  • Be strategic about the gigs or side hustles you take on. Look for opportunities that align with your skills and schedule and that offer fair compensation for your time and effort.
  • Treat your gig work or side hustle like a real business. Set aside dedicated time to work on it each week, keep good records of your income and expenses, and be open to potentially reinvesting some of your earnings into the business to help it grow.
  • Prioritize time management. When juggling extra work with other commitments, time is money. Explore tools and apps that help you plan and prioritize tasks to ensure you make the most of your available hours.

It's also important to note that gig economy and side hustle opportunities are constantly evolving. Staying informed about trends, learning new skills, and adapting your offerings to changes can help to maximize earning potential.

Avoiding Tax Surprises

Most gig and side hustle workers are classified as independent contractors, not employees. This classification affects how you report income and what taxes you're responsible for. As an independent contractor, you're essentially running your own business, which means you're subject to self-employment tax and income tax.

Unlike traditional employees, taxes usually aren't automatically withheld from payments to independent contractors. This fact means you may need to make estimated tax payments to the IRS for each quarter of the year. Failing to make estimated payments can result in penalties and a large tax bill at the end of the year.

To avoid tax surprises, it's wise to set aside a portion of each payment for taxes. A common rule of thumb is to save around 25-30% of your income for taxes, though the exact amount can vary based on your tax bracket and allowable deductions. Also, remember that expenses related to your work may be tax deductible - miles driven, work-related supplies, and other costs may reduce the amount you owe. If you have questions about what can and can't be considered a tax deduction, consult a qualified tax professional.

The Bottom Line

For many, participating in the gig economy or starting a side hustle is a powerful way to earn extra money and reach their financial goals faster. If this type of work may be appropriate for you, exploring opportunities in your area can't hurt.

As with any financial strategy, it's important to approach gig work or side hustling with a clear plan and realistic expectations. But for those willing to put in the effort, the rewards may be significant – both in terms of extra money for your savings goals and the satisfaction of building something of your own.