If you’re feeling stretched financially, you’re not alone. More people than ever are taking on side hustles to pay off debt. But is it worth getting a part-time job for this goal?
The short answer is that in some circumstances, starting a side hustle is worth it, but this solution might not be right for everyone. Here’s a closer look at how to use side hustles for debt payoff.
How Side Hustles Help Eliminate Debt
Some people suggest getting a second job when you’re trying to pay down debt quickly. However, scheduling constraints may make it difficult or impossible to manage two traditional jobs, even if one is part-time.
Side hustles are different. Most people use the term “side hustle” to refer to any income-generating activity outside of a W-2 job. When you pick a side hustle where you can set your own schedule and work as much or as little as you want, you can take advantage of your free time to make more money.
Your side hustle doesn’t have to feel like another full-time job. When you’re trying to pay your debt faster, even a few hundred extra dollars per month can make a difference.
The Benefits of Starting a Side Hustle
Here are a few notable advantages of taking on a side hustle and earning extra cash to reduce debt:
You’ll Pay Less Over Time
The longer it takes you to pay off a debt, the more interest you’ll end up paying. On high-interest debts like credit cards, an early payoff could potentially save you thousands. According to Experian, the average credit card interest rate is over 20%, and many credit cards have rates of 30% or more.
You’ll Have Greater Financial Stability
When you’re bringing in more money each month, you’ll have greater flexibility in your budget. If you’re someone who often stresses about covering your bills or overdrawing your account, that extra money could bring stability and peace of mind.
You Might Feel More Motivated
It’s hard to stay motivated when your balance barely moves and every payment feels like a drop in the bucket. But putting even a few hundred extra dollars toward your debt each month can create visible progress. That steady momentum often builds confidence, making it easier to stay committed and continue chipping away at what you owe.
Potential Risks and Drawbacks to Consider
What’s the smartest way to pay off debt? For some people, it’s starting a side hustle. For others, it might be something else. Before you begin hunting for side gigs to pay off debt, consider these potential disadvantages:
You Might Get Burned Out
Some people start side hustles, find that they love having extra money, and go all out. It may seem harmless at first, but overworking yourself is a recipe for burnout.
Remember to pace yourself. You don’t need to figure out the fastest way to pay debt with side gigs—every little bit of extra income counts.
Your Performance at Your Real Job Might Suffer
Even the best freelance jobs for debt repayment can be exhausting at times. If you stay up late driving for Uber or doing freelance work, you might start to feel tired or disengaged at your main job.
Some employers forbid employees from working additional jobs, so before you pick up a side hustle, make sure you review all relevant policies. Putting your career at risk for a little extra money isn’t worth it.
You Might Owe More in Taxes
When you’re figuring out how to make money to pay off debt, finding a side hustle might seem like a clear solution. However, if you don’t understand the impact the extra work could have on your taxes, you might be in for an unpleasant surprise when tax season rolls around.
Depending on how much you make at your regular job, your side hustle income could potentially make you jump a tax bracket. Most side hustles generate self-employment income, so your taxes won’t be withheld from your earnings. Instead, you must pay estimated taxes to the IRS.
You don’t have to get the math perfect on your estimated taxes. The IRS has a “safe harbor” rule that protects you from penalties as long as you pay at least what you owed last year (or 110%, if you’re a high-income earner), even if you earn more this year.
The Best Side Hustles to Pay Off Debt
Wondering how to make extra money on the side to pay off debt? Here are some of the best side gigs for debt repayment:
- Selling items online
- Driving for Uber or Lyft
- Providing freelance web design or other services
- Online tutoring
- Food and grocery delivery
- Pet sitting or dog walking
- Taking online surveys
If you’re looking for a side hustle to improve your financial health, it’s important to weigh your options carefully. Something that takes significant time and pays little could prove to be counterproductive.
Can a Side Hustle Make You Debt-Free?
If you can find well-paying, flexible side hustles to pay off debt, you might be able to slash the time it takes you to become debt-free. However, this isn’t a magic solution. Making extra money to get out of debt is often a good thing, but if you aren’t disciplined about putting the proceeds toward your debt, you might not make much progress.
By knowing your limits, creating a debt payoff plan, and choosing a sustainable side hustle, you can get that much closer to freedom from debt and a brighter financial future.
