As high inflation persists, many Americans are seeing their hard-earned incomes covering fewer of the essentials.
For some, a side hustle may make a lot of sense.
If you’re in a situation where your expenses outpace your income, you’re putting yourself on track to spend down your savings and potentially take on debt, personal finance expert Suze Orman said on CNBC’s Twitter Space conversation, “Invest with Pride: Ready. Set. Grow.”
“If you don’t have the money and you know that, you’ve got to find something else you can do,” said Orman. Spending three to five hours a week doing a second job could easily make up the difference.
“They are paying teenage babysitters $30 an hour,” she said, adding that if you did that for three hours a week for a month, that would net you an extra $400. “That all of a sudden covers your rent increase.”
Before pursuing a side gig, people should establish their goal, whether that is to earn more money, explore a creative outlet or build skills that they aren’t using in their full-time job, said Gorick Ng, author of “The Unspoken Rules.”
“There is more to life than just a single W-2,” he said, adding that he sees people using side hustles to fulfill many dreams from financial freedom to learning new skills or having a creative outlet.
If your goal is to make more money, a side hustle might not always make the most sense, said Paula Pant, host of the podcast “Afford Anything,” during CNBC’s recent Own Your Money (… Before it Owns You) event.
If your main job is in a high-paying profession, it may be a better use of your time to go for a promotion or consult within your area of expertise instead of launching a side gig that’s entirely different.
“Choose whatever is the most time-efficient and energy- and spirit-efficient way of earning more,” she said.
Where you are in life should also factor into your decision to start a side hustle, according to Anh Tran, a certified financial planner and managing partner at SageMint Wealth in Orange, California. For example, if you’re a college student, you may have more time to devote to a potential side gig than if you’re trying to start a family.
It’s important to consider the amount of time and effort launching a business will take versus the potential payoff, Tran said.
“What are you going to have to put into it to get a return, and does that make sense for you from a financial standpoint?” said Tran.
When to pursue a side hustle
On the other hand, if you’re in an industry or occupation where there isn’t a whole lot of financial upside, a side hustle could be an efficient route to earning more.
“At the end of the day, ultimately what matters is the size of the gap between how much you earn and how much you spend,” said Pant. One way of increasing that is to bring in extra income, especially if you don’t want to cut sending.
A side hustle may also make sense if you’re unhappy in your job and think the gig could become a full-time business.
“There’s the common mantra of you can potentially be rich working for someone else, but you may not necessarily be wealthy working for someone else,” said Ng.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.