5 Money Tips for the Self Employed Side Hustle
There are two conflicting rules to live by when it comes to making money for yourself and starting your own business.
One rule is to make sure you have everything “in place” before you try to earn your first dollar. Do you have a business plan? Have you done market research? Competition research? Do you have a business license? Consulted a lawyer? An accountant? Did you get your MBA? How about a logo? Business cards? Should you incorporate or be a sole proprietor?
The other rule is to just go for it. Try to earn your first dollar as soon as you can (a paying customer is the best form of business validation) and then build, grow, and adjust from there.
I think I fall somewhere in the middle.
I like making some plans; getting some ducks in a row. But then I also know that you can spend a lot of time trying to make business cards for a business idea that sucks or isn't going to make you money.
I'm going to focus on the basics – the bare minimum – to get started.
Tip $1 – Start with an exciting (and doable) Money Goal
I started my photography business cause I so BADLY wanted a new $1000 lens. And there was no way I had that kind of money in the family budget.
I had a choice – I could let go of my want or find a way to fund it.
Did I mention that I BADLY wanted this lens?
I used that desire to fuel my new business. I wondered if I could do a few family portrait sessions on the side and earn enough to pay for that lens.
I asked around on Facebook. No big marketing. Just friends and family who I knew had liked my photography in the past.
It didn't take long to book a gig. We figured out a fair price and we were off and running.
That experience soon led to weddings, more gear, a website and a whole lot more.
So why do you want to make money? Maybe it's a much-needed vacation? Or to get out of debt? Or to buy a new computer?
Write down your Money Goal on a post-it. Put that post-it on the side of your computer so you'll be reminded why you're starting or growing your business.
Find your motivation.
You'll need it.
Tip $2 – Open a separate business checking account from the start
Back in 2005, my partner at the time, got my business going by doing something awesome for my birthday.
She made me open a separate business checking account and then transferred $100 into it.
As soon as I had that second checking account, I felt legit. And I felt totally motivated to try to get some cash in it!
Remember that $1000 lens I was trying to buy? Well, I could now see that $100 in the account that made my goal seems so much closer!
I had $100. I just needed $900 more.
I also got a separate credit card so I didn't mix my business expenses with my personal ones.
Add this tip in with the last one about using Freshbooks, and you now have a clean way to handle your business finances!
Tip $3 – Invest in good, easy to use Invoicing, Expense Tracking, and Accounting Software
You will need to pay taxes on your business income.
And you'll also want to deduct your business expenses.
This will take some work come tax time.
You can use spreadsheets to manage your accounts. Especially if you don't have a lot of transactions, clients, or invoices. I used spreadsheets when I started but soon realized it was a pain and there were better solutions that were easier to use and that I trusted would do my accounting the correct way.
The last few years I started using software called Freshbooks.
Freshbooks is a very popular tool for freelances and independent business owners.
I can track invoices from my bank accounts.
I can set up everything I need for tax time.
This is something you should use from day 1 in your business. It'll save you money and time in the end.
Tip $4 – Don't spend all the money you make
As a business owner (even as a sole proprietor), you need to have a plan for your new revenue stream(s).
You'll likely have some business expenses. And you should track those so you can deduct them from your income tax.
But speaking of taxes, you will need to pay taxes on your side-hustle.
How much? Well, obviously that depends on where you live.
I save 30% of my revenue for tax time. I usually don't need to give that much. Which is fine, because when I do my taxes at the end of the year and see that I only need to pay, say, 15% – then I can give myself the rest of what I had saved.
Tip $5 – Gravy Money
Now, this is personal preference, but I prefer my side businesses to provide me with gravy money.
What's gravy money? It's money I don't rely on to run my household. It's not used for groceries. Or rent.
I use my side income for some frivolous spending.
Like taking my family on vacation somewhere.
Or buying a new laptop or fun gear I want to try out.
One of my favourite things to do is to use my business profits to treat the family to a fancy dinner.
What will you do with your gravy money? Take a minute to tell me in the comment section below.
I hope you have a great time building your business, and an even great time spending the money you'll make with it.