Essential Tips for Managing Your Side-Hustle
The way we work is evolving. Instead of having a single job for most of our careers, it’s more common to switch jobs every few years.
On top of that, full time employment is harder to come by and the gig economy is employing more and more of the workforce. In times like these, a side-hustle or a second source of income is appealing.
Not only can you make a great income from a side business, you’re in full control and can choose to do what you love. If you’ve always wanted to design then a side job can make that a reality. What about those who have a passion for writing? A side-hustle can give you the opportunity to express yourself.
If it’s done right, you can leverage your side-hustle into your full time income. Before you can get to that point, it’s important to manage your side jobs properly.
This article will share 4 actionable tips to help you manage your side-hustle and turn it into something more.
Separate business income and personal income
If you want your side project to grow into a successful side business, this is the first thing you should pay attention to. It may be the most important financial tip you ever get.
The income you get from your main job and your side income are not the same and shouldn’t be treated as such. Unless you plan on maintaining your side hustle for a short period, the money should be separated.
When you have a single checking account, it’s easy to mix money together. You may lose track of where certain money came from, who paid you, and how much your side-hustle is actually producing. Sure, you may have more money at the end of every month but how did it get there and what are you spending it on?
Another problem with mixing your side-hustle income and personal income is the extra time required to sort through bank statements. If you’re taking your side-hustle seriously, open a separate checking or savings account to handle all the money it brings in. It’ll save you time in the short term (and money in the long term).
Track expenses religiously
There are clear reasons and benefits of keeping a close eye on your expenses. Unfortunately, many small business owners and side hustlers don’t track expenses. Of those who do, many do don’t track them closely. Not understanding your expenses ensures you lose out on two major benefits.
The first benefit, and the one that’s apparent to most people, is having a clear grasp on your true profit. A business can make a lot of revenue but have expenses that make it unprofitable. That’s why companies like Uber which make billions of dollars have never turned a profit. Tracking your expenses helps you identify areas where you’re spending more money than you should. It can also help you price your services more accurately. For example, instead of absorbing all of the costs of a project in your quoted fee, you can pass some of the expenses on to the client.
The second reason this is an important financial tip is because a lot of expenses are tax deductible. The government knows it takes money to run a business and a lot of the expenses you make are essential to operations. Things like utilities, phones, supplies, rent, etc. can be deducted from your tax bill. There’s one caveat, you need proof of the expense. You probably won’t have proof if you’re not tracking expenses.
An excel spreadsheet may work for this but there are too many opportunities to make mistakes and the process is quite tedious. Online invoicing tools like Quickbooks also double as your expense tracking app. When you use it to track both income and expenses, it gets really powerful. You can see profit and loss at a glance, generate income statements, balance sheets, and everything else you can think of. Even if it’s just a side-hustle now, these things will become very important down the line so why not give yourself a good foundation?
Prepare for tax season
Side-hustle income is different from, and treated separately from, income you make through formal employment. With a job, your employer pays part of your taxes and also withholds tax on your behalf. That’s not the case with your side business.
You’re the employer and the employee. That means you’re responsible for paying all of the taxes. First, if you don’t separate business income and personal income, it will be difficult to know what your tax liability is. Secondly, some income is taxable while other income isn’t.
Even if you have a separate checking account for your side-hustle, your bank won’t itemize your income for you. It’ll only show you who deposited the money and how much. That’s why an online invoicing or billing platform is essential.
A tool like Freshbooks gives you the tools you need to send out electronic invoices to clients and get paid online. Not only that, you can itemize everything on the invoice. This is not only great for your clients but also a life-saver for you. For example, at the end of the month you can open up all your invoices in Freshbooks and see which aspects of your income are taxable or not. For the taxable income, you can then calculate your liability and set it aside for when you want to pay taxes.
Whatever method you choose, be sure to start early. Owing taxes is not a pleasant experience.
Create clear to-do lists and stick with them
A side-hustle can quickly become a full-time hustle in terms of time commitment even if you’re not getting a full-time income. Clients and customers don’t care that it’s your side hustle. All they care about is getting what they paid for. If you’re serious about making the most of both worlds, you have to be efficient with your time.
The fight for efficiency is where project management comes in. Whether you realize it or not, your side hustle is a series of projects in various stages of completion. A blog post used for content marketing is a project. Client design work is a project. Shipping orders to customers is a project. How you manage those projects will determine how much of your time the side project takes.
The first step is to understand the component parts of any project. For example, at a high level, a design project has a client brief, initial mockups, client approval, revisions, final designs, etc. Each of those stages can be thought of as a milestone and turned into an item on your to do list. Instead of one big item like finish client design, you’ll break it down into manageable tasks. This will relieve pressure and make you more efficient. Take it to the next step by using a project management tool like Timesolv. It doubles as an invoicing and project management tool so you’ll always be on track.
The difference between a successful side hustle and one that’s more effort than it’s worth is your ability to properly manage it. Managing your side-hustle has many different aspects that need to be addressed together.
First, separate side hustle income from business income. After that, track both income and expenses through the year. When it’s done properly, you’ll be prepared for the tax man and even have a large amount of deductions to make. When you have the financial aspects under control, it then becomes a matter of protecting your time and wellbeing. Create useful to-do lists that keep you efficient while giving you the time to enjoy your extra income.
A side hustle can turn into so much more if you want but only if you take the right steps in the beginning. This post has outlined them now it’s up to you. Good luck.