According to a MarketWatch Guides survey from earlier this year, the typical gig economy worker brings in about $250 a month from their side hustle. While this may seem like a helpful amount of additional funds to have come into your account, it’s worth noting that the side gig could be hurting your overall finances. The reality is that even though a side gig can open doors and help you chase certain goals that may not be possible at your day job, it could also hurt you financially in some cases.
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Here are some ways side gigs can hinder individuals from achieving their full career potential or keep them poor.
You’re Not Accounting for All Expenses
“I’ve also seen people stay busy without making real progress,” said Taylor Kovar, CFP, founder of 11 Financial. “Sometimes, by the time you cover gas, supplies, subscriptions and your time, the numbers don’t look as good as you hoped.”
You could be spending more than you’re earning to keep the side gig going. When you factor in all of the expenses, you may discover that the hourly rate is below minimum wage and that you’re not making as much as you thought, which is hurting your bank account.
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What Can You Do To Avoid This?
The most important thing that you can do when trying to determine whether a side hustle is worth continuing with is to run all of the calculations and numbers to determine your real hourly wage.
You have to factor in the software or tools that you’re spending money on and any other expenses that come with the side gig. For example, using your vehicle to transport passengers or deliver food could increase your maintenance costs and cost you money in the long run.
You Miss Out on Lucrative Career Opportunities
“I’ve also seen people get so caught up in the hustle that they miss out on bigger opportunities,” Kovar said. “They’re working nonstop, but they’re too stretched to think about what’s next, whether that’s starting something on their own, asking for a raise or just taking a step back to plan the next move.”
When you spend your free time on a random side gig, you could potentially miss out on lucrative career-related opportunities. For instance, you might be too exhausted to attend a networking event or fail to prioritize skill upgrades.
What Can You Do To Avoid This?
Jake Falcon, CRPC, founder of Falcon Wealth Advisors, pointed out that the time spent on driving for a ride-share company or pursuing any other side gig might be better spent on earning a certification, building a business or trying to pursue a promotion at work.
“I went all-in with my career and didn’t get distracted. Instead, I focused on being the best at what I do and adding value to my clients’ lives,” he said.
Your Side Hustle Could Lead to Burnout
Falcon stressed that juggling a side gig can lead to fatigue, which can affect performance at a full-time job. If the side hustle becomes a drain rather than a stepping stone, it can hurt career growth and reduce your earning potential in the long run.
You don’t want to show up stressed to your main job because of a side hustle and then risk any possible consequences.
What Can You Do To Avoid This?
You want to ensure that you’re getting adequate rest and that you’re able to perform to the best of your ability at your primary job.
The point of a side hustle is to bring in some extra cash. You don’t want this extra money to compromise your performance at the job that covers the majority of your expenses.
Lifestyle Inflation Caused by Your Side Gig
Your side gig income could fuel more spending rather than saving or investing since you have access to additional funds. You could be using the extra money from your side gig to maintain an unrealistic lifestyle.
What Can You Do To Avoid This?
Without a clear financial plan, you could end up working more to maintain a higher-cost lifestyle. You want to set a budget or some sort of spending plan so that your side gig helps your financial situation instead of making it worse.
Lack of Strategic Planning
Falcon pointed out that many side hustlers don’t treat their gig like a business. They don’t track profitability, set goals or evaluate return on investment. Without structure or some sort of plan, your side hustle can become a burden on your life and take away valuable free time from other interests.
What Can You Do To Avoid This?
When deciding on a side gig, you want to find something that aligns with your long-term goals or helps you build transferable skills. For example, you could take on some side projects as a writer or graphic designer if you’re not creatively fulfilled at your main gig. However, you don’t want your side hustle to come at the expense of your primary income trajectory.
“Just make sure your side hustle is helping you move forward, not just keeping you busy. With the right plan, a side hustle can grow into something way bigger than just extra income,” Kovar said.
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This article originally appeared on GOBankingRates.com: Why Your Side Gig Is Keeping You Poor — and What To Do Instead
