According to a survey by Bankrate, more than 25% of people have a side hustle. Having another form of income is most common among Gen Z and Millennials, which isn’t shocking, considering inflation and the price of housing have risen significantly in the last several years. The term “side hustle” can include all types of additional income ranging from driving for UberEats a few nights a week to quietly building a company on the weekends. Some people are strictly in it for the extra cash, while others are driven by a passion or deep sense of purpose. Either way, these side projects can be a great way to build a steady source of secondary income for you.
When To Make A Side Project Legal
Unless you are working through a 3rd party platform like Upwork, Fiverr, Doordash, etc., consider making your business legal as soon as possible. Keeping your personal and business income and expenses separate will help you in the long term. You can easily obtain an EIN through the IRS website in a matter of minutes. This will allow you to set up business bank accounts and file taxes for your earnings. You can also file with your business entity (LLC, S Corp, etc) with your state to protect your personal assets. While you can operate as a sole proprietor, there is no legal separation between you and your business, so if someone takes legal action against your business, you can be held personally liable.
When To Make A Side Hustle A Full-Time Job
If you are looking to make the leap, pay attention to your business’s financials for the last 12 months. Ask yourself these questions:
If my lowest earning month became my norm, could I still afford to quit my job?
Can I easily save money for retirement at this income level?
Do I have business and personal savings to cover six months of expenses?
How much more money will I be able to make if I am not working my full-time job?
Not everyone wants to leave their 9-to-5 job for their side hustle. Many regular jobs come with benefits like employer-paid insurance, PTO, life insurance, 401k match, etc. Make sure to factor in the costs of replacing those benefits before you swap your full-time job for your side project.
How To Spend Your Side Income Money
The Bankrate survey shows that 41% of people are using their side project funds to pay for large expenses, reduce existing debt and bulking up savings accounts. While there is no one right way to spend your money, reducing high interest debts or investing at least some of your income could set you up for a better financial future.