Research shows 44 million Americans have a side hustle to earn extra money. If you work a part-time job or run a small business in addition to working a full-time job, you’ve got a side hustle.
If you aspire to start a business as your side hustle, you’ll likely need some startup cash—and a tax refund could be just the cash infusion you need.
To help, here are some tips for using your tax refund to get your side hustle up and running.
The reasons for starting a side hustle
Before we dive into the tips, you might be wondering, “What drives people to work a second job?” From traveling more to paying down debt, people gravitate toward a side hustle for many reasons.
While some people may start a side hustle to get more enjoyment out of life, others may do it out of necessity.
Research suggests 70% of people start a side hustle for financial reasons. Trying to eliminate common debts like school loans, credit cards or medical bills, along with saving for retirement top the list of reasons to launch a side hustle in today’s economy, according to research from CNBC.
Putting your tax refund to work
Ready to start your side hustle? The old adage, “You have to spend money to make money,” rings true in this situation. Before you can start thinking about padding your bank account, you’ll need to estimate your startup costs.
Whether you’re a photographer that needs cameras and lenses or a blogger who needs a laptop and software, there are usually some upfront costs.
One survey shows 51 percent of side hustlers got started with less than $100; another 26 percent invested up to $1,000; and the remaining 23 percent needed more than $1,000 to launch.
Since the average federal tax refund is $2,895, there's a good chance you'll have some cash to put toward your side gig. However, you may need a little extra. If that’s the case, you might consider speaking with a lender to assess your options before making any decisions.
Tips to start your side hustle
1. Decide on a gig
Whether you become a blogger or launch your own online store, there are a lot of side hustles to choose from. Pick something you enjoy, so you don't dread going to your "second job."
2. Know the numbers
Make a list of your required expenses. Do some price comparisons to make sure you’ll get the best deals on purchases, and consider putting all of your information into an organized spreadsheet. Compare the amount you need to get started to your expected tax refund. If it’s enough, excellent. If you’re short, consider a loan or start a savings plan to make up the difference. Depositing your tax refund into a savings account and then contributing a little each month may help you get closer to getting started.
3. Keep expectations realistic
Be realistic about the kind of money you'll make. It may take time to see the boost in income you're hoping for.
4. Maintain balance
When you launch a side hustle, you're essentially working two jobs — and that can be tough on anyone. It's easy to get burned out from doing a side hustle and a regular nine-to-five job so remember to work toward a healthy work/life balance.
If you have a tax refund coming, funding a new side hustle might seem less daunting. By using the tips above, you could be on your way to turning your side hustle dreams into a profitable reality.