Are you struggling with the ever-rising costs of living? You're not alone. Many people are looking for ways to supplement their incomes in today's economic landscape. In fact, one in three workers today is part of the gig economy – a significant rise from a decade ago. The scale of this trend is immense: In 2023, there are an estimated 73.3 million freelancers in the U.S. alone. On a global scale, the gig economy is generating a staggering $204 billion in gross volume. Ready to learn more about the wonderful world of side hustles? Let’s dive in!
What Is the Gig Economy?
The gig economy refers to a labor market where short-term, flexible jobs are commonplace. Instead of a traditional 9-to-5 job, people work on gigs or tasks, usually connected through an online platform.
The “gig economy” has three main parts:
- Workers get paid per task. Instead of an hourly wage or a monthly salary, gig workers earn money for each job they do. That’s why people sometimes call it the “freelancer” or “on-demand” economy.
- Customers ask for a service, and gig workers do it. This could be a ride, food delivery or something similar. This is also why some people call it the “sharing” or “peer” economy.
- Companies link the worker and the customer. There are special apps or websites that help customers find gig workers. This is sometimes called the “platform economy.”
Gig workers encompass a wide variety of professions, from musicians, artists and photographers to landscapers, babysitters and delivery drivers.
Popular Side Hustles
Wondering if the gig economy is worth your time? Along with the benefit of being able to set your own schedule, the gig economy offers a variety of money-making options. Here are few side hustles to explore:
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Ride-hailing driver. If you like driving, consider joining Uber or Lyft. Work when you want to and earn extra, especially during busy hours. Just make sure you have a good car and smartphone.
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Food delivery. If you prefer less chit-chat, deliver food through apps like DoorDash or Uber Eats.
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Grocery shopper. Love shopping? Try Instacart or Shipt. Shop and deliver groceries for others. Some even claim you can earn up to $22 an hour!
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Freelance work. If you’re creative, check out Upwork or Fiverr. You can do things like writing, designing or even voice-overs.
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Babysitting. Parents often need sitters. Let your friends and family know you’re available.
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Pet services. If animals are your thing, walk dogs or pet sit. Share your services online or through word of mouth.
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House cleaning. Not afraid of some dirt? Clean homes for others. It’s a great way to earn while listening to your favorite tunes.
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Sell crafts. Like to make things? Sell your crafts online using platforms like Etsy.
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Coaching. If you’re good at something, teach it. Music, sports, academics or even life skills – teaching or tutoring can be a fulfilling way to earn.
Financial Responsibilities in the Gig Economy
While side hustles can boost your income, they also come with financial obligations. Here’s what you need to keep in mind:
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Taxes. Unlike traditional jobs where your employer withholds taxes, as a gig worker, you are responsible for your own tax obligations. This usually means paying estimated quarterly taxes and being aware of deductions.
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Self-Employment Tax. When you work for yourself, you’re both the employer and the employee. This means you’re responsible for both the employer and employee parts of Medicare and Social Security taxes, known as the self-employment tax.
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Earnings. It’s vital to maintain accurate records of what you earn. Many platforms provide an annual summary, but keeping your own records is always a good idea.
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Expenses. Keep track of business-related expenses. These can often be deducted from your taxable income. This includes things like mileage for driving gigs, necessary supplies for your craft hustle or any online advertising costs.
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Health insurance. Traditional jobs often come with benefits, including health insurance. In the gig economy, you’re responsible for your own insurance, so plan accordingly.
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Retirement. Without an employer-sponsored retirement plan, it’s on you to save for your future. Consider setting up an Individual Retirement Account (IRA) to help secure your financial future.
Pros and Cons of the Gig Economy
Before you dive headfirst into a side hustle, you’ll want to weigh the pros and cons.
Pros
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Flexibility. One of the biggest draws of gig work is the flexibility it offers. You can choose when, where and how much you want to work, providing a work-life balance that many traditional jobs can’t match.
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Extra income. Side hustles are a great way to earn extra money to pay off debt, save for a big purchase or simply increase your income.
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Diversity of jobs. There’s a wide range of jobs available in the gig economy, from driving and delivery to freelance writing and graphic design. This variety allows you to find something that fits your skills and interests.
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Low entry barriers. Many gig jobs don’t require specialized education or training, making it easier for a wide range of people to participate.
Cons
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Lack of benefits. Gig workers are usually considered independent contractors, which means you won’t receive benefits like health insurance, retirement plans or paid time off.
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Income instability. Your earnings can be unpredictable, depending on how much work is available and the rates you can charge. This inconsistency can make budgeting and financial planning challenging.
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Less job security. There’s no guarantee of job stability or consistent income in the gig economy. The demand for gig services can be volatile, and there might be periods when work is scarce.
Knowing these pros and cons can help you make an informed decision about whether participating in the gig economy is the right choice for you. Consider your personal financial situation, your need for stable income and how much risk you’re willing to take on. If you decide to proceed, select a side hustle that aligns best with your skills, interests and financial goals.
We’re Here to Help
The gig economy offers an array of opportunities to earn extra income. However, it’s vital to be proactive about your financial responsibilities. With a little planning and diligence, you can make the most of your side hustle while staying financially sound. If you need help managing your money, reach out to Amegy Bank.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Amegy Bank.