Is Your Side Job Actually Making as Much Money as You Think?

Side jobs, side hustles, and freelancing work have dramatically increased in recent years, and economists are even predicting that they could become the norm. If you are a millennial, chances are very high that you have held at least one side job in your life. With high levels of student debt and low levels of entry-level pay, most new graduates take up part-time work to earn a supplementary income. Even those with career positions may find themselves occasionally freelancing on the side. The internet has made this relatively easy and pain-free. While anyone can go online and perform a task for $5, does that indicate a profitable way to spend your money? In other words, are you actually earning enough money to justify the time and effort you put into your side job?

An Investor’s Perspective 

A side job is less a conventional way of earning income and is more of an investment for most individuals. Think about why you work the second job. Isn’t it to earn extra cash to repay debt, buy penny stocks, invest in stocks, or save for a vacation? Investments are determined based on how much they earn in returns for the capital spent. When you take up a secondary job, the capital is your labor. The returns in pay should be equal to or more than the value of time and effort spent working. If you can spare an hour every Sunday to earn $5 doing an easy freelance job, then you can consider that time well-spent; especially if you were going to spend that time watching TV or napping. However, if you are spending two or three hours on a weekday doing a side hustle that earns you only $5, then that is not a solid investment. You could instead spend that time working overtime at a better-paid job, studying, or getting some much-needed sleep. 

The Fee Factor 

There’s another capital expenditure to consider when you take on a side gig: fees. If you rely on a website to find clients like most freelancers in the gig economy, then you are most likely paying a fee for it. Freelancing websites may cut a percentage of your earnings as a service charge. The fee may not be unreasonable, but it should not affect your earnings as much. Even in conventional investing, those who invest in index funds or similar entities lose a chunk of returns as fees. The soundness of such as investment depends on whether you earn more than the capital investment after the fee cut. How much of that $5 pay do you have left after the website takes its cut? Now do the remaining earnings justify your labor and time?

How to Choose a Side Job That Actually Results in Good Returns

It’s certainly not worth it spending hours on a job that only generates a couple of dollars. You should be spending your time in a more lucrative manner to justify your initial efforts. You can easily identify a job that is not generating enough money by simply taking into account the time and resources you spend on it. Consider this scenario: you can spend two dollars on fees to write a blog for a client for a return of $10. Or, you can spend less time investing those two dollars on a security. Your margin of return, for a well-calculated investment, would be much higher. In the rush of the gig economy, it’s worthwhile to stop and think whether all the hard work you put into side gigs are earning you returns, or if you are just overexerting yourself. You might be able to earn a lot more merely by investing conventionally or saving your money in a bank account. 

No Comments

    Leave a reply