If you’ve just started your first side hustle (or two) – welcome to the club! It’s a great feeling to have extra cash rolling in every month. But did you know that your side gig will also require a bit of cash flow management?
If you haven’t created a game plan to manage your side hustle finances yet, fret not! Keep reading to learn our top five tips for getting a handle on your extra earnings. This way you can get closer to your financial goals faster than you ever imagined.
1. Never stop tracking
If you aren’t carefully tracking all the extra money you’re bringing in (against your side hustle expenses), then you’ll never get a true sense of whether the effort you’re putting in is paying off. The good news is: You don’t necessarily need a fancy bookkeeping system to keep tabs on your side hustle earnings.
“I track it all in my spreadsheet throughout the month,” says Diana Farmen, a middle school teacher and founder of Diana on a Dime.
There’s also another benefit of tracking your side hustle finances on a consistent basis. Whether you’re bringing in an extra $500 or $5,000 a month from your side gigs, you’re officially an entrepreneur, with an obligation to file your taxes. Farmen knows all too well about juggling side hustles and keeping track of her finances. She’s got five income streams, including her full-time teaching job.
Farmen says that her spreadsheet makes it easy for her to calculate how much she needs to set aside for paying taxes on the income she brings in. Without this step, she would be in for a bit of a shock when tax time rolls around. But, by estimating her taxes throughout the year, she is prepared to handle the payment when she files her taxes in the spring.
You can also take a look at the IRS website to figure out the different types of small business deductions you can take. This way you can begin to keep track of these expenses month to month. For example, you may be able to deduct office supplies, gas mileage, Internet services and more.
2. Be careful how you budget
Some side hustles are inconsistent in nature, so it’s important to adjust your budget accordingly. In Farmen’s case, her budget is based only on her salary.
“As I make money through side hustles, I add it to the income section of my budget and in my notes I add how much I set aside for taxes, if needed,” she says.
At the end of the month – once she has her final numbers – she determines a purpose for her side hustle income. This usually involves putting extra payments towards her student loans, emergency fund, or sinking fund.
3. Keep things separate
In this case, out of sight, out of mind, is actually a good thing!
One of the best ways to manage your side hustle finances is to keep your extra income in a separate bank account so that it isn’t commingled with regular earnings from your 9 to 5 job. This makes it a lot less tempting to blow through those extra earnings! Plus, if you’re a Chime member you can also watch your savings grow by using your Chime Visa Debit Card to make purchases. When you use your card, Chime will round up each purchase you make to the nearest dollar, and transfer the round up amount right into your Savings Account.
4. Be cautious when taking on debt
If you can start a side hustle using your savings or better yet, find one that requires virtually no start-up money, that would be ideal. However, if you’re looking to scale your side hustle gig into a full-blown business, think about using debt only if you have no other choice. Or, use debt in small increments with a plan to pay it back fast.
“I sometimes see people investing in five-figure web design, or fancy editing, or (full-blown) photoshoots, without first having done basic market research or getting clear on how they (plan to make) money. So, suddenly they find themselves in all this debt with no way to pay it back,” says Amanda Abella, author of Make Money Your Honey.
In her case, Abella leveraged debt incrementally to avoid overextending herself.
“I knew what I could handle on a credit card, for example: the cost of mentorship or a (particular course). And then I was under a deadline to hustle and find new clients to pay it off in time – which I always did,” says Florida-based Abella, who is also a Latina brand ambassador.
5. Outsource to grow your business
This usually comes into play once your side hustle game starts to grow.
Leah Gervais, founder of Urban 20 Something says that “outsourcing, both personally and professionally, was critical in my business growth.”
“Business-wise, I started with things that could be automated. This included email marketing, scheduling out social media posts, and using Quickbooks to track my income and expenses. Eventually, I started looking at what tasks I did daily or weekly that made me the least amount of money and/or could be done by someone else, and started outsourcing them. Things like graphic design, social media management, and podcast production.”
Gervais also looked at other obligations that took up her free time and prevented her from working more and started outsourcing those as well.
“I started hiring a cleaning service to come and that shaved hours off of my week. I also started using a grocery delivery service to save time. These have not only helped my business but my sanity,” she says.
With these five side hustle money management tips in mind, now is the perfect time for you to start earning extra cash with a side gig. Are you ready to give it a go?