11 Things to Consider Before Choosing a Side Hustle – Wallet by BudgetBakers

Side hustles don’t need to be a disaster.

The 2020s are the age of the “Side Hustle.” And there’s no wonder why. Housing prices have skyrocketed—up to 162% in some regions—far outpacing wage growth. CPI, a standard measure of general inflation, has also outpaced wages, meaning everyday goods and services cost more. Wages, while rising, haven’t kept up, and that leaves many people with shrinking purchasing power. There are many regions, particularly in the United States, where even households with two average incomes can’t afford the median-priced home. 

Since 2010, wage growth has trailed CPI and housing prices across the US. 

The price-to-income ratio for homes has reached record highs as well, making home ownership, one of the best traditional means of increasing one’s wealth, increasingly out of reach for many people. In 2010, it would take an average wage earner 10 years, saving 30% of their pre-tax income, to afford the median priced home. Today, that number is 23 years. 

And this is not just a recent development. The baby boomer generation, now retiring, could expect to buy a home with savings of less than 6 years, and that’s assuming only one income. For two adults making the median wage, it would now take over 10 years to afford a home, while saving almost a third of pre-tax income. In 1970, that was just 3 years. 

At the same time, job insecurity is rising, with a majority of businesses now claiming to use Ai in their everyday operations. Some analysts believe that the hidden job losses to Ai are even more profound than they seem, as companies quietly scale back on hiring, and dial up their dependence on products like ChatGPT. However one may feel about the ethics or the practical benefits of this arrangement, the fact is that more of us are turning to “side-hustles” to afford lifestyles that our parents’ generation found far more accessible. 

So how do we pick a side hustle that makes sense for us? What are some of the big mistakes to avoid? Today we’re going to tell you everything you need to think about before you decide what to do with your precious time, because the only thing worse than having to work a second job, is failing to make any money while doing it. 

🧠 Interests

Online advertising and social media influencers talk about side-hustles largely in terms of money, and that makes sense. But one of the best indicators of success at self-employment is your basic level of interest in the work itself. 

We’re not saying you should be overjoyed to start a second job… but mild enthusiasm would certainly be preferable to pure pain and boredom. A side hustle should be, if nothing else, stimulating or rewarding, so that you will actually feel some motivation to go out and do the work. 

If you’re going to spend your evenings crocheting dog sweaters, you better love dogs, yarn, or both. If you’re going to drive an Uber, you’d better love talking to people, or exploring the city’s nightlife, or at least drinking red bull and listening to audiobooks. Really think about what the process of doing your side hustle will look like, and see if anything about that process sounds interesting, or engaging, or even fun. 

For this, try sitting down and creating a vision board about your side hustle. What are some things you think will be included, and what are some things you’re looking forward to, or not? If you begin to find that many of the things you’re including are things you don’t like, that could be a sign that it isn’t the right job for you. 

🛠️ Skills

Just because you love something doesn’t mean you’re good at it. (Sorry!)

We’d all love to monetize our talents, but we have to first take stock of our actual skill level. Maybe you love the idea of doing handyman work in your spare time, but can you actually hang a picture or sand a countertop? Can you plan and execute a simple DIY project, or do you not know where to start? 

Picking the right hustle could just be a matter of your own expectations for yourself. Maybe you aren’t a carpenter, but that doesn’t mean you couldn’t get started with carpenter-like jobs. Putting together Ikea furniture doesn’t take a huge amount of skill, yet people are willing to pay for someone to do it for them. That might be a great way to get started on jobs you know you can do. Picking a hustle that’s too difficult is terribly demotivating, and bound to result in all kinds of problems, from issues with client satisfaction, to burnout and unforeseen costs that arise because you don’t have enough experience. 

Consider in a clear-eyed way, what you’re really good at, and why. If you have a more academic background, consider jobs that cater to that experience, like tutoring, or proofreading, or research. If you’re more of a hands-on person, try to find a role that is slightly more demanding than you’ve done before, but nothing completely unknown. The key is to push your level of comfort a little, but never so much that you’re utterly lost. Who knows? You may end up turning that side hustle into a full-time gig, if you like it enough and end up being great at it. 

💸 Budget

Starting a side hustle can be surprisingly expensive. Think: equipment, marketing, website hosting, and the occasional fast food that you end up buying because you ran behind on a project. Your time always has a value, and everything you can’t do because of your side hustle should be understood as its own separate cost. If you don’t cook for yourself, that needs to be factored into your budget. If you need supplies, that has to be considered. If your clothes or your car, or your home will see higher depreciation because of your hustle, you’ll end up paying those costs, either up front, or later on. So it’s better to know what they are now. 

Board by Budgetbakers, our small and medium business budgeting and expense tracking tool, can help you plan and monitor your small business finances along the way. One of the big benefits of Board is the business indicators dashboard it provides, which will help you see at a glance, whether your small business is thriving, or in trouble. It’s everything you love about Wallet, but made for a profitable small business. 

📊 EBITDA

Speaking of finances, yes, we’re getting fancy. But don’t panic—EBITDA just means Earnings Before Interest, Taxes, Depreciation, and Amortization.

In plain English: how much money are you actually making? Board by Budgetbakers can help you visualize your income and expenses, giving you a clearer picture of profitability. If your side hustle is costing more than it earns, it’s time to reassess. Or else relabel the whole exercise as “charity and volunteering.” 

Depreciation

For example, a business that relies on a depreciating asset like a car, needs to have a clear understanding of how much the depreciation on that car is contributing to the business’s earnings. If you make $5000 driving an Uber, but that $5000 ends up costing you $4000 in depreciation on that vehicle, and you still have to pay $1000 in income tax, you’re operating a structurally unprofitable small business. 

Amortization

On the other hand, some assets become more valuable over time. If you operate a small Airbnb, you may experience some depreciation on the equipment and furnishings, but because you’ll be paying your mortgage from the earnings of the business (the meaning of amortization), the net value of your business could rise year over year, as your Airbnb pays for itself. You may then experience a situation where your net earnings are low, but your assets are increasing. In that case, as long as your EBITDA doesn’t go negative, you might have a small business worth continuing.

By the way: we previously did an in-depth analysis of Airbnb as a business. You can use our free Airbnb business calculator to find out if it makes sense for you. 

The point of tracking EBITDA is to understand all the top line financial data about the business. Whether it really makes sense as a business. It tracks a business’s health outside of factors you can’t control, it helps you understand whether your business is really thriving, or whether at the end of the day, you’re better off doing something else. Here’s a simple breakdown of why EBITDA matters.

Source: Hadley Capital

🛡️ Insurance

If your side hustle involves physical products, services, or human interaction, you might need insurance.

Selling baked goods? Liability insurance. Driving for a rideshare? Car insurance. Teaching yoga? Insurance for your spine and theirs. Insurance is a key cost that has to be considered in any side hustle. Some gig economy platforms like Uber and Airbnb offer their own special insurance packages as part of the service, paid for through your platform fees. But evaluate carefully, and read the fine print. It may be necessary or at least smart to get more coverage, including coverage of potential lost wages while you wait for an insurance claim to go through.

Nobody wants to think about the worst happening, but according to Murphy’s law, whatever can go wrong, will go wrong. So plan for things to go as wrong as they can, and make sure you’re covered. 

⏰ Time

Time is the only resource money can’t replace. It’s the only thing you truly own: your own free time. What you do with that time ought to have a value, because we can guarantee you: giving up that time will always have a cost. 

Before committing to a side hustle, ask yourself: do I have the time? Wallet can help you identify time-related expenses (like commuting or childcare), but it can’t assess for you how much you think your own time (and sanity) is worth. Remember: free time isn’t free. It always has a value, and that value is important. 

🧑‍🤝‍🧑 Social Life

Side hustles can be isolating, and emotionally taxing. If you’re spending every weekend editing videos or packaging orders, your social life is going to wither. Maybe you’re ok with that, or maybe you don’t socialize much. But keep in mind that the amount of contact you’re likely to have with your peers will be less if you’re working an extra 10-20 hours every week. This is partly why doing something you enjoy can be so important. Otherwise, it will be highly demotivating, and you’ll end up burning out. 

Read our previous post on “Budgeting for Happiness” to make sure you’re allocating enough time and money to your hobbies and things that recharge your batteries and refill your soul. Working even more means that you’ll need to pay extra attention to activities that make you feel whole again. 

🦺 Safety

Aside from the financial questions about insurance and profit, no side hustle is worth your body and your personal safety. Is your side hustle safe? Physically, emotionally, digitally?

Whether you’re selling handmade knives or teaching English via Zoom, consider the risks. Are there systems in place to prevent financial fraud, stalking, racial or gender based attacks, or other forms of abuse? Is your data and your identity completely secure? Are you certain to be paid promptly and in full? 

Try reading blogs from other hustlers, and talking to people who have done the kind of work you’re thinking about, and listen to their negative stories and lessons learned, as much as their advice about how to do a good job and maximize your earnings. 

⚖️ Legality

Just because it’s profitable doesn’t mean it’s legal. (Looking at you, backyard moonshiners.)

Check local laws, licensing requirements, and tax obligations. Do this even if the platform or employer you’re looking at claims they’re above board. There have been numerous and repeated incidents of gig economy jobs operating in legal grey areas that put the workers at risk, far more than the platforms and employers. Make sure you’re buttoned up, legally.  

Consider also how much it might cost to be embroiled in a legal dispute. If you’re going to drive an Uber, consider what will happen if you are dragged into a lawsuit, or if you’re ticketed or found legally liable for an accident. These issues cost time and money, regardless of who is at fault. Budgeting for the worst case scenario means building up a legal fund, which you can do in Wallet or Board by budgeting a set amount each month from your earnings. 

This consideration often demonstrates that a side gig promises to be a little less profitable than it appears on the surface. But knowing ahead of time how much money you ought to save to cover yourself legally, is an important practice for your financial hygiene, and your peace of mind. 

🎓 Ethics and Integrity

Would you be proud to tell your grandma about your side hustle? There are plenty of gigs that pay well, but come with unacceptable risks and social stigmas. If you’re going to be freelancing as a developer or working as an online… “entertainer,” consider that every job has its long term effects on your mental wellness, and your social status. Would you be happy for your friends and family to know what you do for extra money? 

If your hustle involves misleading customers, exploiting loopholes, or selling questionable products, then it’s not worth it. BudgetBakers believes in transparency and integrity—Wallet and Board are designed to help users make informed, ethical financial decisions. Your side hustle should reflect your values, not just your bank balance. Do only what you would be happy to defend to your family and friends.

Every person’s values and ethics are different, and this part is more about being true to your own values and beliefs. Money isn’t everything. 

👴🏻 Experience

It seems obvious, but consider your experience level. Are you ready to turn your hobby into a business? Maybe you can hem your jeans or set up your blog. But does that mean you’re a clothes designer or a web developer? Would you hire yourself for a serious job, or are you faking it to make it? It’s best to do something at which you have confidence, and at which others should have confidence in you. 

Every expert started as a beginner. It’s not out of the question to stretch your own abilities and try something new. But starting with a strong basis of ability in a related field is a good idea, and probably better for your profitability.