How To Manage Your Side Hustle Finances

With all the madness of juggling a full-time job, family time, and an extra side hustle — It’s easy to forget about your finances. Millions of small businesses have at least one additional part-time job — on top of their full-time one. How in the world are you supposed to manage all this? I’ll tell you how. This article will explain some fundamental ways to manage your side hustle finances.

What Not To Do

I have had one side hustle or another throughout my entire adult life. Anything from selling insoles to my current copywriting. I have sold insoles, had an eBay business, Celtic store, drop shipping, blogging, social media management, etc. In the early days, I just ran my day-to-day and never worried about the finances until taxes were due. This was hell. Trust me, only let all your finances pile up at the last minute! For about five years, I kept saying I would stay on top of it, and it still got away from me. I work full-time from home and will likely never return to the traditional workplace. In fact, in five years, I wouldn’t be surprised if working from home became the norm rather than the exception. 

From the moment you start your side hustle, you should be thinking about the finances of your new business. If you don’t have a plan for your money or are not tracking it, you’ll have no idea how much money is coming in or going out.

Take Time To Read About Small Business Finance

There are many resources to help you learn about managing your side hustle as a business. Read books, blogs, and articles written by experts in the field. If you want advice on managing your finances as a freelancer, start by reading our blog post.

Track Income and Expenses

When you track income and expenses in detail, you’ll be able to tell what’s working and what isn’t. You’ll be able to see whether your sales are increasing or decreasing over time, which will help you decide what changes need to be made for your business model to succeed. You can also use this data when negotiating or discussing pricing with potential clients. If taxes are too overwhelming for you, find assistance from accountants for sole traders. 

Re-Invest Without Acquiring Debt

You can’t afford to take on debt because of your side hustle. That means you need to take advantage of any opportunity to save money, whether buying used equipment or renting office space instead of owning it. If you need more cash flow in the short run, consider taking out a small personal loan at a low-interest rate for a fixed period of time — such as 12 months — so you can invest in growing your business without taking on debt.

Budget Carefully

You must have some budgeting discipline when managing your finances as a side hustler. It’s easy to spend money when it’s not coming out of your monthly paycheck, but you have to set aside enough money for taxes and other expenses related to running your business (like insurance).

Know When To Outsource

You may be tempted to do everything yourself, but outsourcing can save you time and money. If you’re good at something (say, writing), outsource the other stuff (like marketing). This is especially true if your side hustle is in a field that isn’t related to your day job. For example, if you’re a doctor and want to start a yoga studio on the weekend, don’t try teaching yoga yourself — outsource that part of the business!

Optimize Your Invoicing

Make it easy to pay by offering multiple payment options like a credit card, PayPal, or ACH transfer. If someone needs help paying their invoice, offer an invoice discount as an incentive for early payment. Also, keep track of all payments received so that you can send periodic statements reporting what clients owe.

Separate Bank Account

You might be tempted to keep all your money in one account, but that can lead to problems if something goes wrong with one of the businesses you’re working on. If you run into trouble with one of your jobs, having separate accounts will make it easier to take action quickly and mitigate any damage.

Pay Yourself First

In other words, set aside some money from each paycheck before paying bills or other expenses to pay yourself back later — ideally when you’ve earned more money from another gig. This ensures that at least some of each paycheck will go toward building up savings and investments for emergencies or retirement down the road rather than going toward expenses immediately.

Conclusion

A side hustle can grow your income, but you need to manage it thoroughly to avoid losing some money to the taxman. Many people who run successful side hustles fail even to report them to the IRS. Tracking and managing your side hustle while on the little time you have may seem like a great challenge. But there are some things you can do to ensure you are putting your best foot forward when managing your small business finances. Don’t forget to track EVERYTHING; you need to pay taxes.