Side Hustle Smarter, Not Harder

Side Hustle Smarter, Not Harder

Side hustles are so integral to Millennials’ economic lives that our generation invented a whole suite of apps designed to facilitate them — Uber, Instacart, Postmates, transcription services, dog-walking services, house-sitting services, and many, many more. 

As my clients have grown up, their side hustles have gotten more sophisticated and polished, but the substance is still the same: These are secondary income streams that give us financial flexibility. 

The ideal side hustle is simple, doesn’t stress you out, and pays you well. It doesn’t have to be a million-dollar idea. Fulfilling grocery orders, teaching English to students abroad, and walking dogs are all great side hustles. You can also leverage your professional experience: If you work in project management, accounting, or marketing, or a wide variety of other fields, your skills could be hugely valuable to small business owners who need just a few hours of help every week. 

If you can leverage skills and relationships you already have, you’ll probably find at least one client in your network. And if you can treat your side hustle as a business from the beginning, integrating that income into your personal finances can be seamless. 

What Is A Grown-Up Side Hustle? 

Just as mowing lawns or making ice cream cones gave you money to spend at the mall — or whatever you did to kill time as a teenager — think of your side hustle as a way to generate stress-free, obligation-free money. If you really want to max out a Roth IRA but just can’t get there this year, a side hustle could generate those final dollars. If you’re saving up for a down payment on a new home next year, a year of hustling could help you build up the cash savings you’ll need. 

Once you’ve set your financial goal, ask yourself what you have to offer. A side hustle is anything you do outside of your full-time job to generate additional income. It can be anything from selling handmade crafts to charging electric scooters to managing social media for a small business. Whatever your skills are, you can find a side hustle to match. 

There are lots of ways to market your side hustle online, but many if not most of these relationships begin with personal connections. Try to find your first clients within your network. Working with people you know will help you ease into this new lifestyle and get a sense of how long various projects take and how much stress they cause. That way, when you land your second client (and your third, and beyond), you’ll have a much better sense of what you can offer and how much you should charge. 

Setting Up Your Side Hustle Finances

From the beginning, treat your side hustle like a business, even if you don’t formally create a business. Keep track of how much you’re earning, pay your taxes on time, and remember that your side hustle income may not be there forever. 

Try not to rely on your side hustle income for your day-to-day expenses, at least until you’re well established. Pay as many bills as you can using the money you earn from your full-time job, and use your side-hustle earnings to build up your savings or to treat yourself. That way, if your life changes and you no longer have the time or energy to freelance, you won’t have to make significant changes to your regular spending. Plus, when you’re working as a freelancer or contractor, your employer has very few obligations to you. Your pay probably won’t be the same every month, and they could close up shop or eliminate your role at any time. 

That said, once side hustle income starts rolling in, you’ll save yourself a ton of stress if you know how to manage it. 

If you’ve typically gotten a W-2 from your employer at the beginning of tax season, you may fall victim to a challenge lots of freelancers face when they start out: Paying taxes on self-employment income. If you’re earning money as a contractor rather than an employee — that is, if you receive a 1099 at tax time rather than a W-2 — you need to pay both income taxes and self-employment taxes on your earnings. What’s more, the IRS expects those payments in quarterly installments throughout the year. 

From the beginning, invoice your clients on a regular basis — many freelancers use the last workday of the month — and keep track of how much you earn. Use a spreadsheet to keep track of how much you earn each month from each client. 

Then you can create columns that automatically calculate how much you owe to the IRS and to your state and local tax departments. (These amounts vary depending on your income and where you live, but start with 30% in federal taxes, 3% in state taxes and 2% in local taxes. If you overpay, you’ll get a big refund in the spring!) In your spreadsheet’s final column, subtract your tax liabilities from your gross earnings. Whatever is left over is your take-home pay. 

Treat this like the money you get in the paycheck you’re used to — taxes have been paid, so the rest of the money is yours to use however you want to. 

Setting Your Hours And Rates

Side hustles are, by definition, secondary priorities. You might be working a side hustle on top of a full-time job or parenting — so don’t let it cause you more stress than it’s worth. 

When you set your rates, think about how much you earn in your current role or how much you earned in your last day job. Make sure to set your rates higher than that to account for the taxes you’ll have to pay. And remember that most business owners use contractors because they’re cheaper than full-time staff, so they expect to pay a little more than they would otherwise.

Just like with a full-time job, it’s perfectly OK — it’s actually a good thing! — to ask for regular raises. If you pursue certifications or new skills that make you a more valuable resource, explain that to your clients. You can negotiate each contract separately, raising your rates slightly each time you land a new client. You can also ask for feedback as you would from a traditional boss so that you can continue to grow your skills. 

That said, you don’t constantly have to be growing. If two clients are enough to move you toward your financial goals, you can say no to a third. Your side hustle is about enhancing your life, both financial and personal — not vice versa. Don’t burn yourself out!

What Will Your Side Hustle Help You Achieve? 

To get the ball rolling, you can start with something as simple as a LinkedIn post or targeted emails to your contacts. If they can’t use your services, ask them to spread the word. Make sure to ask your clients if they’d be willing to write LinkedIn reviews or act as references for future clients so that word will spread. 

Once you build some momentum, your side hustle will start growing — especially if your clients spread the word about how great a job you’re doing. Lots of side hustles grow into full-time businesses that pay full-time salaries. But don’t feel like that’s the inevitable outcome of freelancing. If all you want is some extra cash for a travel fund, that’s plenty. As long as your work moves you toward what you want to achieve, you’re on the right path. 

The post Side Hustle Smarter, Not Harder appeared first on Gen Y Planning.

Author: Vritra

Leave a Reply

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