Ready to start Your Side Hustle?

Input all of the fields below and we will give you a comprehensive plan to launch your new side hustle.

Starting a side hustle can be an exciting and rewarding experience. But before diving in head first, it’s important to get your finances in order. A side hustle takes time, effort, and often some startup costs. So you’ll want to make sure your finances are stable enough to support this new venture.

What skills or interests do you have that you could leverage for a side hustle?
How much time can you dedicate to your side hustle each week?
Do you have any funds available to invest in your side hustle initially?
Is there a particular industry or niche you’re interested in exploring for your side hustle?
Who is your ideal customer or target audience for your side hustle?
How do you plan to make money?
What platforms or channels will you use to market your side hustle?

Get Financially Literate In 2024 Reading One Email Per Week

Subscribe to Only Finance, the most popular newsletter presented by Priceless Tay

We respect your privacy. Unsubscribe at anytime.

Scroll down to find your custom results once you submit your intake form.

Assess Your Current Financial Situation

Before starting a side hustle, it’s important to thoroughly review your current financial situation. This includes looking at your income, expenses, assets, liabilities, and credit score.

First, tally up all of your monthly income sources, including your salary, spouse’s income, child support, etc. Then make a list of recurring monthly expenses like rent, utilities, car payment, insurance, groceries, and debt payments. Subtract your expenses from your income to find your current disposable income. This will help determine how much money you can devote to your side business in the beginning stages.

Next, list all of your assets – the things you own that hold monetary value like your home, vehicles, investments, and savings accounts. Then make a list of liabilities – the debts you owe like mortgages, student loans, and credit cards. Subtract your liabilities from your assets to find your current net worth. This will give you a snapshot of where you stand financially.

Finally, check your credit report and credit score. This will show you an overview of your payment history, amounts owed, credit age and mix, new credit inquiries, and other factors that influence your score. A higher score (over 700) will make it easier to get funding if needed for your side hustle.

Reviewing all of these elements will allow you to realistically determine how much money, if any, you can devote to start up costs for your side business. It also highlights areas, like debt, you may want to address before taking on more financial obligations.

Set Your Financial Goals

Before launching your side hustle, it’s important to set clear financial goals so you know what you’re working towards. Decide how much extra money you want or need to earn through your side hustle, both in the short term and long term.

Short term goals might be saving up for a vacation or paying off a credit card. Long term goals could include building an emergency fund, paying off student loans, or saving for retirement.

Determine specific dollar amounts for each goal and the timeframe you hope to achieve them. This will help you calculate how much income you need your side hustle to generate.

For instance, if you want to save $5,000 for a vacation in the next year, you’ll need to earn an extra $400-$500 per month through your side hustle. Defining your financial goals gives purpose and motivation to your side hustle efforts.

Choose the Right Side Hustle

Choosing the right side hustle that matches your skills, interests, and schedule is key to finding success. Take some time to make a list of your talents, hobbies, and availability to work. Finding an opportunity that aligns with your strengths will make the work more enjoyable and set you up for satisfaction.

For example, if you love baking, starting a cake pop business on nights and weekends could be the perfect fit. Or if you have a knack for photography, picking up freelance gigs for parties and events may work with your 9-5 schedule. Think about what you’re good at and passionate about. The right match will make your side hustle feel less like work and more like a rewarding hobby.

The best way to start figuring out what side hustle would be right for you is to create a list of all your skills and interests.

Take your time finding the ideal side hustle opportunity. With some self-reflection and planning, you can find the perfect match that aligns with your abilities and lifestyle. This will set you up for a satisfying and successful side hustle.

Open a Separate Business Bank Account

Keeping your side hustle finances separate from your personal finances is crucial for proper tracking and tax purposes. The IRS recommends that all small business owners have separate bank accounts. Having a dedicated business bank account allows you to easily differentiate between business and personal expenses and income.

When money from your side hustle and personal accounts mix, it can quickly become confusing to determine what funds are available for each. With a separate account, you’ll have a clear picture of your business cash flow. This makes tax time easier as well since your income and expenses are neatly organized.

Overall, opening a dedicated account for your side hustle provides clarity, convenience, and control over your finances. Keeping business and personal funds separate is a best practice recommended by financial experts.

How to Track Your Income and Expenses

Keeping detailed records of your income and expenses is crucial for any side business.

There are a few ways to effectively track this financial information:
  • Use accounting software or spreadsheets. Programs like QuickBooks, Wave, or Excel allow you to categorize transactions and run reports on income, expenses, profits, and losses. This makes tax time much simpler.
  • Save all receipts related to your side hustle expenses. These may include equipment purchases, mileage for driving, fees, supplies, etc. Having documentation will help you accurately deduct business expenses on your taxes.
  • Review income and expenses regularly, such as monthly. This helps identify any accounting issues or trends in your side business finances.

How to Manage Taxes

When you start earning income from a side hustle, it’s important to be aware of your tax obligations. The income you earn from your side gig is considered self-employment income by the IRS.

This means you need to pay self-employment tax on your earnings. Self-employment tax consists of Social Security and Medicare taxes, which equals 15.3% of your net earnings.

To avoid penalties, it’s recommended to make quarterly estimated tax payments on your side hustle earnings. The IRS requires you to pay taxes on your income as you earn it throughout the year. Paying quarterly helps you avoid owing a large tax bill when you file your return.

You can deduct valid business expenses from your side hustle earnings to reduce your taxable income. Tracking income and expenses is crucial. Deductible expenses may include mileage, supplies, equipment, internet, etc. Keep good records to substantiate deductions in case of an audit.

Hiring a tax professional can help you navigate your side hustle taxes, estimated payments, and deductions properly. With good planning, you can manage your tax obligations while growing your side business.

Your Side Hustle Plan

Disclaimer: The side hustle tool provided on this page are for informational purposes only and should not be construed as financial advice. We do not guarantee the accuracy, completeness, or suitability of the tips for your specific circumstances. Use your discretion and judgment when applying any suggestions to your financial situation.

Disclosure: This post may contain affiliate links, meaning we receive a commission for purchases made through these links, at no cost to you.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *