In the face of continued economic uncertainty, many people have found themselves looking for ways to earn extra income. This has contributed to the rise of side hustles– second jobs that may be remote, seasonal or part-time and often associated with a person’s passions or talents.
Below are financial considerations to keep in mind if you already have started, or are interested in starting, a side hustle.
Strategies to earn passive income
Earning passive income is about creating systems that generate money with minimal ongoing effort. Some of the most effective strategies include investing in dividend-paying stocks or real estate, which can provide steady returns through dividends or rental income.
Digital opportunities are also powerful, like creating online courses, e-books, or templates that allow you to earn money repeatedly from a single piece of content. Affiliate marketing, contracts for content creation and automated e-commerce stores can bring in income around the clock once they’re set up.
For those seeking lower-risk options, high-yield savings accounts, bonds, or REITs offer more stable, predictable returns. The key to success is diversifying across several streams, allowing your money and ideas to work for you while you focus on long-term growth and financial freedom.
Side job ideas and freelancing
There are countless ways to earn extra income outside your main job, depending on your skills and available time. Popular side hustle ideas include freelance writing, graphic design, tutoring, pet sitting, or driving-by-the-hour for rideshare services.
For those with specialized expertise, consulting or online coaching can be highly profitable. Creative individuals might explore selling handmade goods, photography or digital art. The key is to choose something that aligns with your interests and you can grow sustainably over time (consistently and without burnout).
Simple side hustles
If you’re looking for low-effort ways to earn extra cash, simple side hustles can be a great starting point. Options like completing online surveys, renting unused space or equipment, delivering groceries or reselling items online require minimal setup.
These hustles often have flexible schedules and low startup costs, making them ideal for beginners or anyone short on time. Small, consistent efforts can add up to meaningful extra income each month.
How to easily make money online
The power of the internet includes endless opportunities to generate income. You could start a blog or a YouTube channel and monetize it through ads or influencer/affiliate marketing, selling digital products like templates or e-books, or offering freelance services (like tutoring, writing or editing). Consider your skills and expertise before you consider which money-making option you should focus on.
Success online often comes from consistency—building an audience, refining your offerings, and reinvesting profits to scale your efforts.
The importance of financial planning with your side hustle
You may have a hobby or idea that would make a great side hustle, but it’s not always as simple as making money. First, consider what your side hustle entails. For example, if you want to sell custom T-shirts, do you have the materials on hand to support selling your product? Will you need to invest in supplies?
And ask yourself if you truly have the time to commit to a second job or hobby. It is wise to consider everything that’s needed upfront for any new venture, and how it will impact your current financial status, resources and work-life balance. Carefully evaluate potential startup costs, such as equipment, inventory, workspace/software required and compare that to your available funds.
You don’t want your side hustle to send you into a financial crunch. Find time to review your current bank accounts, bills, expenses and current income. This will give you a clear picture of where you stand and what resources you have available for your second job.
Tip: Build an operational buffer. To protect your side hustle from slow months or unexpected costs, set aside an operational buffer equal to one to two months of average expenses. For example, if your side hustle costs $500 a month to run, aim to keep $500–$1,000 in reserve. This cushion helps you stay consistent even when income fluctuates.
Managing taxes for your extra job
It’s important to understand how your second job affects your taxes. Even if your gig feels small or informal, all income must be reported to the Internal Revenue Service (IRS). If you earn more than $400 in profit from self-employment‡ in a year, you need to file a tax return and pay self-employment tax for the year—15.3% total (12.4% for Social Security and 2.9% for Medicare).
To prepare, set aside about 25–30% of your income for taxes in a separate savings account. This works like the tax withholding from a standard paycheck and helps you avoid a big bill later (usually in the spring). If you expect to owe at least $1,000 in taxes for the year, you may need to make quarterly payments using IRS Form 1040-ES‡.
Keeping track of your income and expenses is key. You may be able to deduct business costs like supplies, mileage and software to lower your taxable income.
How to estimate part-time job taxes, step-by-step
- Start with total income: Let’s say you earn $10,000 from your side hustle.
- Subtract business expenses: If you spend $2,000 on supplies and tools, your taxable income is $8,000.
- Calculate self-employment tax: $8,000 × 15.3% = $1,224.
- Estimate income tax: Consult with a tax professional to determine your tax bracket. In this scenario, we have assumed a 10% income tax rate, which would result in another $800 of tax due.
- Total estimated taxes: $1,224 + $800 = about $2,000.
- Set aside funds: Save roughly 25% of your income ($2,500) to cover both self-employment and income taxes comfortably.
This simple calculation helps you plan and avoid surprises at tax time each spring.
When is a side hustle a business versus a hobby?
The IRS looks at several factors to decide whether your side hustle is a business or a hobby. The main difference is intent: a business aims to make a profit, while a hobby is done (mainly) for enjoyment. You’re generally considered to be running a business if:
- You work regularly and continuously at it.
- You keep records and treat it like a business.
- You depend on the income for part of your livelihood.
- You make changes to improve profitability.
- You’ve made a profit in at least three of the last five years.
If your activity doesn’t meet these standards, it may be classified as a hobby. That said, you must still report income, but can’t deduct expenses beyond what you earn.
Tax record-keeping checklist
Keeping organized records makes tax filing easier and helps you claim all eligible deductions. Use this checklist to stay on track:
- Income logs (invoices, payment receipts or 1099 forms)
- Expense receipts (supplies, tools, subscriptions, etc.)
- Mileage records for business-related travel
- Bank and credit card statements for business accounts
- Copies of quarterly tax payments
- Home office expenses (if applicable)
- Equipment-purchase records and depreciation details
- Year-end profit and loss summary
Since tax rules can differ by state and business type, it’s smart to talk with a tax professional. Staying organized and planning early will help your side hustle stay profitable and stress-free.
Side hustles for retirees
If you’re recently retired, but have a career of professional experience, you may find you still want to use those skills.
Right now, there are opportunities for remote freelance or side-gig work, including copywriting, data entry and virtual administrative work. This work is still being outsourced due to a more flexible work-from-home environment option in the U.S.
For many retirees, leveraging their background in management, operations or specialized trades can open the door to consulting work, mentoring, or short-term project roles. These options not only provide supplemental income but can also keep you engaged and involved in your industry.
Before diving in, it’s important to understand how extra income can affect your retirement benefits.
Extra income can make more of your Social Security benefits taxable—up to 50–85% if your combined income exceeds $25,000 (single) or $32,000 (married filing jointly). A financial planner can help you balance side income with your retirement goals and tax situation.
By carefully planning and seeking professional advice, you can make the most of opportunities available while safeguarding your financial stability.
How to use multiple income streams
Once you figure out the basics of your side hustle, it’s time to be strategic about your second income. Do you plan to use this money to build your savings or put it toward a big purchase? Consider funneling your side hustle money into a separate account, or even a high-yield savings account or CD to make that money work even harder. The last thing you want to do is experience lifestyle creep because you think you are making more money with your side hustle than you really are.
Also, consider keeping your side gig income in a separate bank account. This makes it easier to track what you earn and keeps you from spending more just because you’re making extra money.
Use a simple plan to divide your income. You might save 25–30% for taxes, use 20% to reinvest in your business, put 30% toward savings or paying off debt, and keep 20–25% for personal spending. Setting up automatic transfers can make this process easier and more consistent.
Reinvesting some of your profits—like buying better tools, marketing your work, or learning new skills—can help your side income to grow. Check on your progress every few months and adjust your plan as your goals change. This way, your extra income supports your financial future instead of just adding more spending.
To plan for your side hustle, consider working with a financial advisor who can help with your unique circumstances. A financial advisor can help you manage accounts for separate expenses, create a budget and goals specific to your gig work, and can give guidance as you experience the self-employment journey. Working with a financial team allows you to focus more on doing what you love and keep hustling to pave the way for financial comfort.
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