Side hustles can help you explore a passion as a career or utilize skills you don’t possess at your main job, not to mention making some extra income!
However, certain side hustles require upfront expenses and require an EIN number; other costs could include marketing budget, website setup fees or retail POS software license fees.
How much can I make?
With cost of living pressures, inflation and recessionary fears causing financial uncertainty for many Brits, more individuals are turning to side hustles for extra income. Side gigs provide a steady source of funds which can be used towards paying off debt or saving up for vacation/car expenses/covering rising energy bills as winter draws nearer.
Starting a side hustle doesn’t need to be hard; but, before getting underway, it is essential that you carefully consider why and plan what goals can be accomplished in your free time. Understanding why and what goals can be accomplished will allow you to identify how much time, energy and money should be dedicated towards this venture and ultimately be earned as profits. Furthermore, developing a business plan will enable you to track earnings, expenses and profits and help ensure a smooth tax season preparation experience.
Regardless of whether your side hustle is yet making a profit, it’s essential that you spend some time investigating how competitors operate and what steps can be taken to differentiate yourself from them. For instance, if selling goods through an online marketplace is one way you could differentiate yourself by providing unique offerings or services which draw customers in.
Be mindful of the legal structures surrounding your side hustle. For instance, if you choose Uber driving or tutoring as your side gig, for tax purposes you are considered both employed and self-employed; thus you must file separate returns for both employment and freelance works.
If your side hustle is only making a minor amount of money, registering as a company and opening an account might not make much sense. But if your goal is to grow it into an income-producing endeavor, sole proprietorship or corporation formation could be wise considerations.
How much time do I need?
An additional income source or simply something fun, side hustles offer many possibilities. No matter why or for what reasons they’re undertaken, however, it is crucial to be clear on why and what your goals are before undertaking this venture. Without clear goals in place it can be hard to stay motivated through its many ups and downs.
Once you understand why and what, consider how much time can be dedicated to your side hustle. If you already have family, friends, and work commitments that take priority over anything else in life, adding yet another commitment may not be realistic. Be sure to balance any side hustle activities with exercise, restful periods, and quality time spent with loved ones.
Consider both your skill set and time commitment before selecting a side hustle. While certain side hustles require upfront investment in terms of supplies or equipment, others simply demand your expertise and time – for instance a craft business may require initial material purchases before sales can commence; on the other hand, freelance businesses might require learning about online marketing, social media management or SEO before expanding further.
Last, but certainly not least, you must set realistic expectations about your hustle’s profit potential. Many people fall prey to underselling themselves, so it is vital that you assess what your skills and experience are worth so that you can set fair charges accordingly.
Establish and adhere to a schedule so your hustle doesn’t become overwhelming, or take over your life. Spending too many hours or neglecting other aspects of life could result in burnout and ultimately failure; track your schedule over a few weeks in order to gauge how much time can be dedicated towards this venture and remember it may take some time before results appear!
How much money do I need to make?
As a freelancer or business owner, it’s vitally important that your goals remain clear. By understanding exactly what it is you want from this venture off-the-clock, staying on track and being more efficient with time and energy spent can be easier. This is particularly applicable if you are managing multiple projects at the same time – prioritize accordingly so your best work gets done each week!
Before embarking on any side hustle, it’s wise to establish an emergency savings fund, particularly in an industry with fluctuating income streams. There will no doubt be periods where there are few profits, and having some savings put aside can provide peace of mind while your endeavours return the desired returns. Having this cushion of cash allows you to cover expenses until business picks back up again.
One of the biggest mistakes people make when starting a side hustle is taking on more than they can manage, leading them down an exhausting path and possibly jeopardizing their full-time job. To prevent this from happening, set clear boundaries at the start and only accept as much work as is manageable; keeping track of progress over time also can provide useful feedback on whether your efforts are bearing fruit.
Failure to file taxes on earnings from their side hustle is another common oversight, so be mindful when reporting and tracking off-the-clock earnings as you should pay quarterly taxes just like regular job earnings. Seek professional guidance if necessary if unsure what you need to do.
By keeping these tips in mind, you can identify an ideal side hustle for yourself to help increase earnings and achieve financial goals. Just remember that your side hustle must be something you are truly passionate about if it is to remain sustainable over its various ups and downs.
How much do I owe in taxes?
Within the gig economy, Americans are finding creative ways to earn extra income via side hustles. Rideshare drivers, tutors, Airbnb hosts, eBay sellers and freelancers of various sorts may qualify as self employed for tax purposes and set their own schedule. While this provides flexibility and freedom to set their own agenda, it does come with some key tax considerations.
As a standard employee, your employer will withhold federal and Social Security taxes from your paychecks before depositing them into your bank account – that’s how our system works. But if you work as a freelancer or run a small business, regular income and self employment taxes must be paid separately through 1099 income. Figuring out exactly how much tax owe can be difficult at first but this guide may help.
There are a few steps you can take to prepare for tax season and reduce your tax payments, one being creating a record-keeping system for side hustle earnings and expenses – whether that means labeled manila folders or an app with cloud storage capabilities for receipts – this will allow you to keep accurate records when filing tax returns or in case the IRS audits you.
One great idea for managing side hustle expenses is opening a separate checking account dedicated to them. This will make tracking spending and adding up taxes simpler, and could provide peace of mind knowing you have funds available if something unexpected comes up like your water heater breaking. Finally, opening a savings account might give you peace of mind knowing there is money set aside in case an emergency comes up such as replacing it when needed.
If you want to ensure you’re doing everything right with your side hustle, consider hiring a professional tax preparer like RamseyTrusted tax pros. Their experts know all about small businesses and freelancers/side hustlers alike and can assist in setting up W-4 forms, paying estimated taxes, setting up payment plans for those struggling financially, as well as relieving stress from this process by taking on all of their hard work for you.