Local Community Advertising
I am no stranger to the side hustle—I have played in bands and resold records for most of my adulthood—although with advances in technology and increased popularity, it’s hard to meet someone who doesn’t have a side gig these days.
Case in point I recently took a trip down to Seattle to see a University of Washington football game (go Dawgs!) and every step of the journey involved a side business. I bought the tickets from someone on Facebook, we stayed in an Airbnb, we hired a dog sitter to come and look after our furry friend, and we took an Uber to the stadium.
Each one of these service providers told me they had a full-time job elsewhere but were taking advantage of the opportunity to earn additional income.
The moral of the story is you can turn almost anything into some extra cash. But before you jump in with both feet, there are a few things you should know to ensure your side gig doesn’t end up costing you money.
Tip 1
Don’t underestimate how much a few hundred dollars of income can impact your taxes. If you are inadvertently underreporting income to the government and get caught—which is likely—you’ll face significant penalties. While I have heard some experts say to budget 30 per cent for taxes, it really depends on what your existing tax bracket is. The higher your principle income, the more you need to set aside from your additional income. If you are in a lower income bracket, you’ll need to set aside less.
Tip 2
If the intent of your side hustle is to use the extra income to pay down debt or save, make sure that's exactly what it’s doing. I've seen many people who invest in home-based, direct sales businesses or inventory-intensive reselling (such as refinishing antiques) that don't make enough to cover their costs. Sometimes, just covering costs of your expensive hobby can be reason enough to take the plunge, but if you are hoping for some extra cash for your winter getaway to Hawaii, you’ll need to make sure that you are doing more than simply covering costs.
Tip 3
Enlist the help of experts. A tax specialist can provide valuable advice around deductions and what you expense claims as a result of your side hustle. What an accountant saves you in hard earned cash will be well worth what you pay them. In addition, tell your financial planner about additional income. It helps us plan for your future better—even if you have no intention of saving your extra earnings—we’re okay with that, we just need to know about it.
Stacey Agecoutay, CFP®, CIM, RRC, RIS, is a wealth planning specialist at Valley First, a division of First West Credit Union. Connect with Stacey at SAgecoutay@valleyfirst.com.
Local Community Advertising