7 Bad Money Habits That Can Sabotage Your Side Gig Success
Written by
Cynthia Measom
Edited by
Joe Evans
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
If you’ve recently picked up a side gig to make some extra income, you’re not alone. More than half (55%) of Gen Zers and millennials have a side hustle. On average, these two groups earn $1,253 a month from their side gigs. Specifically, Gen Zers bring in $1,505 a month on average, and millennials earn $1,119.
No matter how you look at it, that’s a nice chunk of change. Even so, you can easily sabotage your side gig success if you’re not careful with your earnings.
Here are seven bad money habits to avoid.
Not Having a Specific Plan for Your Money
Erika Kullberg, attorney, personal finance expert and founder of Erika.com, said one bad money habit that can sabotage a side hustler’s success is thinking the money earned can be splurged on expensive items or lifestyle upgrades. Instead, you should set aside money toward savings goals and bills.
“Set up automated transfers into high-interest savings or investment accounts, so that their arrival to your checking account does not tempt you to spend immediately,” said Kullberg.
Ignoring Taxes and Legal Obligations
Another bad money habit is overlooking side gig’s possible tax implications and legal requirements.
“You could get penalized, fined or prosecuted,” said Kullberg. “Learn about reporting and paying self-employment income tax, including when to file, the amount of tax due, what you can deduct and how to make estimated tax payments. Keep income and expense records and receipts to make tax preparation and compliance easier.”
Making a Purchase Simply Because ‘It’s a Write-Off’
Nick Loper of Side Hustle Nation said that hustlers fall victim to making unneeded purchases simply because they’re a write-off.
“And yes, becoming a business owner opens you up to all sorts of new and legitimate tax deductions, but you still need to be mindful of your margins,” said Loper. “I’m all for making strategic and intentional investments into your business to help fuel growth and make life easier, but you should try and have a specific use case or ROI in mind for every new purchase.”
Investing Too Much Too Quickly
Tyler Howe, financial advisor and owner of Clarity Wealth Management, feels people make the mistake of investing in their side hustle too quickly before they know what they need to make things work and grow.
“They get so excited about growing and gaining clients that they make impulse purchases and later realize if they would’ve planned more strategically they would have made different purchases,” said Howe. “Now they are either stuck with equipment, products [or] services they don’t need and the daunting realization that they have to spend more money to get the actual items needed.”
Not Charging Enough
Harriet Formby, founder of Below The Line Finance, said that one bad money habit of side hustlers is charging too little for their products or services.
“It’s common for side hustlers to consider only direct costs, like materials and shipping, without factoring in the hidden costs like their business overheads and taxes,” said Formby.
Not Separating Side Gig Income From Personal Finances
According to Formby, another bad money habit that sabotages side gig success is failing to separate business and personal finances.
“When you run a venture of any size, you really need to keep a separate bank account to track the income and expenses accurately without them being tangled up in your personal money,” said Formby. “Otherwise, it becomes near impossible to have clarity on your finances and makes reporting your earnings for tax purposes (and your own sanity) much harder than it needs to be.”
Overspending On Things You Could DIY
“Sometimes people procrastinate on getting going with their side gig until they can afford the professional branding, [an] elaborate website and high-end tech,” explained Formby. “However, it’s often more effective to simply begin with what you have, do a bit of scrappy DIY and invest incrementally in marketing, branding [and] tech once you have tested the idea and got some traction.”
More From GOBankingRates
