Money Management

It turns out that only 15% of side hustlers are making $1,500 or more each month. 

As more people look to boost their income, side hustles are becoming more common. According to a recent study by Zippia, nearly half of Americans have a side hustle in 2023. But the average American is likely making less than you think by working a side hustle. Over half of Americans with a side gig bring in less than $500 a month. But that doesn’t mean it’s not possible to earn more money.

The average side hustle brings in $483 per month

Zippia researched the growing popularity of side hustles in the United States. Its findings show that 45% of Americans have a side hustle in 2023. With increasing living costs, it’s no surprise that more people must supplement their income to survive more comfortably.

Are you considering getting a side hustle and want to know how much money you can realistically make from it? The average side hustler may be making less than you think. Zippia found that the average side hustle brings in $483 a month. Men, on average, bring in $596 a month, while women, on average, bring in $378 a month.

A large number of people overall make less than $500. More than half (56.4%) of side hustlers make less than $500 a month, and only 15% earn more than $1,500 monthly from their side hustle. If you plan to get a side hustle soon, this information is worth knowing to set realistic income goals.

Four tips to boost your side hustle earnings

In the same study, Zippia found that 72.3% of side hustlers earned less than $1,000 monthly. But 12.7% made between $1,000 and $1,499 a month. Even if it’s not the norm to make $1,000 or more, you can bring in a significant amount of extra money from a side hustle.

The following tips may help you earn more money at your side gig:

Lean into your unique skills: You could make more money from a side hustle that requires a unique skill set. As you explore opportunities, consider whether your skills could help you earn more. For example, someone who works as a graphic designer can offer graphic design consulting services in their free time. Since not everyone has this skill, the earning potential can be notable when compared to other gigs.Track your time: While many side hustles can be a win for your wallet, not all are worth the time. It’s best to consider the time commitment required and average earning potential first. If you’ve been working a side hustle that brings in a meager hourly income and your goal is to increase your savings account balance, you may want to focus on a more profitable side hustle, so you put your free time to good use.Cut out the middleman: Some side hustlers, like food delivery drivers and dog walkers, rely on mobile apps to get work. While working through a mobile app can be convenient, you’ll earn less money this way. That’s because the company takes a portion of your profits. Don’t be afraid to advertise your services elsewhere to boost your earnings.Don’t forget to market yourself: Not all side hustles offer instant work. Many side hustles require you to market your services to land enough work. For example, a freelance writer can boost their earnings significantly by reaching out to brands to offer their services, which can increase profits. Being your own salesperson can pay off.

Increased income can help you achieve your financial goals

If you’re unhappy with your current income level, don’t be afraid to explore ways to make more money. Working a side hustle a few hours a week could be an excellent way to boost your income so you can pay off debt and save more money. But make sure you’re working a profitable side hustle if you’re working on important personal finance goals.

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You don’t want housing costs to take up too much of your financial resources. 

Once you retire, you may have to get used to living on less income than you did during your working years. Even if you have access to multiple sources of income, like monthly Social Security benefits and withdrawals from an IRA account or 401(k) plan, you might still have to consider cutting back on spending if you’re nowhere close to replacing your pre-retirement paycheck in full.

Now, as is the case during your working years, one of your biggest expenses in retirement may be none other than housing. So it’s important to know how much house you can afford during that stage of life.

Generally speaking, you should aim to keep your total housing costs to 30% of your income or less. This holds true whether you’re working or retired. But depending on your situation, you may want to go below that 30% threshold when it comes to housing during retirement — especially if there’s another large expense eating up a lot of your budget.

Know how to calculate that 30%

When we talk about keeping housing costs to 30% of your retirement income or less, we’re not just talking about the cost of mortgage payments. Rather, that 30% should encompass all predictable and recurring housing expenses, from property taxes to homeowners insurance to HOA fees.

The good news is that many people end up fully paying off their homes by the time they retire. So if you land in that boat, it may be conceivable that you’re able to keep your housing costs to 30% or less of your retirement income.

But remember, 30% is really the most you should be looking to spend on housing. And you may want to go below that limit if healthcare in particular is becoming increasingly expensive for you.

When you need to spend even less on housing

Some retirees find that it’s not housing, but rather, healthcare, that constitutes their largest monthly expense. Now the amount of money you’ll need to spend on healthcare as a retiree will hinge on different factors, a big one being the state of your health and how well you take care of yourself.

But one thing you should know is that healthcare in retirement may be more expensive than you’re anticipating. Fidelity reports that an average 65-year-old couple retiring in 2022 is looking at spending about $315,000 on healthcare throughout retirement. Ouch.

Reading between the lines, if you don’t have “average” health, but rather, poor health, then your medical bills might be even higher. So in that case, you may need to compensate by spending less on housing. After all, healthcare is something you don’t want to skimp on — not when you’re younger, and definitely not when you’re older.

Once your career wraps up, you may find yourself spending more time at home than you did when you were working. So it’s important to have a comfortable living space. But it’s also important not to go overboard on housing costs — especially at a time when your income is fixed and you may have other expenses monopolizing your budget.

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It’s a move that could get you in hot water. 

Filing your taxes can be stressful enough in its own right. This holds true whether you owe the IRS money or end up waiting for a refund to hit your checking account. But perhaps the most worrisome element of dealing with taxes is getting audited.

Kiplinger reports that in recent years, the IRS has been auditing much less than 1% of all individual tax returns. So in reality, your likelihood of getting audited is pretty low to begin with.

But that doesn’t mean you won’t end up on the IRS audit list. And if that happens, what’ll generally occur is that you’ll receive a notice in the mail from the IRS asking for more information about your tax return, or disputing a specific element of your tax return.

In fact, you should know that the majority of IRS audits are conducted by mail, and not in person. The IRS simply does not have the manpower to knock on doors individually each time it needs to question a tax return.

Getting that letter, however, can be a daunting experience in its own right. This is especially true if you’re not sure how to even respond.

But perhaps the worst thing you can do upon receiving an IRS audit notice is to ignore that letter and hope it goes away. Not only will that not happen, but you could end up being penalized financially for neglecting to respond to the IRS.

Don’t just wish the problem away

You may be inclined to ignore your audit letter and hope the IRS won’t pursue the matter. But that route is unlikely to work out well for you.

According to H&R Block, if you ignore your audit notice, the IRS will have the right to make changes to your tax return, like removing deductions or credits you’ve claimed. That could easily result in a lower tax refund or a higher IRS bill.

The IRS might also hit you with additional penalties for ignoring your audit notice. And if you don’t respond to that letter, you’ll effectively waive your right to appeal a decision the IRS makes in court.

How to handle an audit notice

In many cases, an audit notice is really just a way for the IRS to request more information. Let’s say you’ve claimed a deduction for equipment needed to perform your side hustle on your tax return, and the IRS isn’t sure that deduction is legitimate. In many cases, simply responding to that letter with receipts and other proof of your purchases will make the problem go away with no financial harm to you.

If you’re not sure how to handle your audit notice, your best bet is to reach out to the tax professional who helped you file the return in question. And if you did your taxes solo but don’t know what to do about your audit letter, find an accountant or tax professional who can help. Many people in these roles are willing to offer support even if they weren’t the ones to handle your taxes in the first place.

It’s easy to see why you might get spooked when an audit letter arrives in the mail. But no matter what you do, don’t make the mistake of ignoring it. Doing so is apt to make the problem exponentially worse.

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I knew Aldi was a discount supermarket chain, but I didn’t realize how much I could save. 

Week after week, as I go over my grocery bill, it feels like the same thought keeps running through my head: “That didn’t used to cost this much, did it?” And I know I’m not the only one. Inflation has shot up over the past year and has yet to settle itself back down. It seems like the price of just about everything has gone up, including groceries.

As a result, my husband and I have been making an effort to ease the strain on our budget by lowering our weekly food costs where we can, whether by reaching for the generic-brand item that tastes the same as the name-brand or cooking more dishes that feature less-expensive ingredients. This week, we decided to try shopping at a different store to see if it would make a significant difference in what we paid, and whew, did it ever.

Filling up our cart at Aldi

We normally shop at our local Metro Market, a grocery store chain under the Kroger umbrella. It’s a nice, big store with a ton of variety, but I wouldn’t classify it as particularly high end or expensive. As I mentioned already, we’re not shy about getting the generic brands, and we’re pretty good about regularly clipping any available coupons on the store’s app before we head out to shop. But even still, we’ve noticed our receipts totaling higher than they used to.

We’re lucky to have plenty of grocery store options in our neighborhood, and we often pick up certain items at other stores where we think the selection is better. But this week, we decided to do our entire shopping trip at Aldi. If you’re not familiar with Aldi, it’s a German supermarket chain with nearly 3,000 stores in 39 states. It also offers extremely competitive prices, thanks to cost-saving ideas like selling primarily Aldi-exclusive brand items and its no-frills approach to shopping (renting a cart with a quarter, bagging your own groceries, and items being sold directly out of their shipping boxes rather than stacked neatly on shelves).

Comparing apples to apples

After our shopping trip this week, we felt good about the total we paid, but we thought it would be an interesting experiment to get a more precise measurement of how much we’d saved by shopping at Aldi. We went through our receipt item by item and built a virtual shopping cart on Metro Market’s website. In the end, the Aldi bill was 35% lower than what we would have paid at Metro Market.

To be fair, not every item was an exact one-for-one swap. For example, the box of Cheez-It crackers at Aldi was 7 oz while the box at Metro Market was over 12 oz, and the cashews at Metro Market came in a 14 oz container versus 12 oz at Aldi. But for the most part, we were able to use pretty precise comparisons for this imaginary shop, and the Aldi bill still came out to significantly less than what we would have paid this week at Metro Market. Only three of the 18 items we bought were more expensive at Aldi.

Do what you can to eke out savings

Despite this significant decrease in our credit card bill, I don’t see us swearing off Metro Market and shopping exclusively at Aldi from here on. But it was an excellent reminder that there are ways to protect our savings account balance during this time of higher costs.

Shopping at Aldi this week was a painless switch with a rewarding benefit. It made me want to look for other ways to save that could be right in front of me but I haven’t yet thought about trying. Maybe I’ll start doing more errands by foot or bike instead of driving around my neighborhood so I can save on gas. Or maybe I’ll keep looking for more entertainment options at my local library before shopping at a store.

Whatever it is that works for you, see what changes you can make to keep more money on hand. You may be surprised how easy it is to find something that doesn’t negatively affect your quality of life but does positively affect your personal finances.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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