If you’re looking for a financial boost, a sideline is a great place to start. Not only do you earn extra money, but you also diversify your income. Having a second source of income can be a lifeline if you lose your full-time job.
If you’re in about a third of Americans with a sideline, you need to make sure that the money you make is worth your time and energy. Follow these five steps to make more money with your side business.
1. Set yourself SMART goals
Whenever you invest your time or money, you increase your chances of success when you clearly define your goals. Try to use the SMART goal approach to set goals that are:
- Time based
Suppose you want to earn some extra money walking dogs. âMaking more money walking dogsâ wouldn’t be a SMART goal. A better example would be “Earn $ 500 next month walking dogs” or “Get three new dog walking concerts by the end of the year”. When setting SMART goals, try to be as specific as possible about how to achieve them.
Once you’ve set your goals, check your progress at least once a month. When you regularly achieve your goals, try to set even higher goals in order to continue to grow your business. If you don’t reach your goals, try not to get frustrated. Take a step back and assess what you need to do differently to reach them.
2. Outsource when appropriate
Your secondary activity is an investment. Instead of investing your money, you are investing your time. Your time is limited. There is an opportunity cost when you choose to perform one task over another. This is why outsourcing certain responsibilities is a smart way to maximize your additional income.
You can outsource certain tasks directly related to your secondary activity. Let’s say you’re a freelance web designer, but office duties eat up the time you’re actually able to design. You can hire a virtual assistant to take care of the administrative tasks so that you can focus on the job that really makes money, which is website design.
But outsourcing personal tasks can also help you earn more from your side. For example, if you make $ 50 an hour as a freelance writer but can pay someone else $ 25 an hour to clean your house, the tradeoff may be worth it. Or maybe it makes sense to pay a little more to have your groceries delivered because you can spend your extra time at work instead of standing in line.
3. Track your hourly earnings
Even if you don’t charge by the hour, monitoring how much you earn per hour is extremely useful for secondary scammers. This will help you identify the work that pays off. Equally important, you can eliminate unnecessary work.
Freelancers often find that a particular client consumes significantly more of their time, even if they are charging them the same amount. If you see this happening, it’s time to charge that customer more. Or you can just choose to get rid of that client so that you can focus on easier, more lucrative work on an hourly basis.
If your sideline is driving for a rideshare service or delivering restaurant food or groceries, tracking your hourly earnings can also be helpful. You may find that working certain hours or focusing your efforts on specific areas pays much better.
4. Give yourself raises
When you have a full-time job, you often have annual performance reviews with your boss where you discuss compensation. But that doesn’t happen when you are a gig worker.
If you are a freelance writer negotiating rates with clients, reevaluating what you charge at least once a year is a must. At a minimum, make sure you raise your rates enough to keep pace with inflation. But don’t forget to defend yourself. If you think your work is still of high quality, be sure to increase your rates enough to reflect the value you add.
5. Take advantage of tax deductions
A good thing about a sideline: you may be able to deduct work expenses that you cannot deduct for your full-time job.
A home office is a good example. If you are a W-2 employee who works remotely, you cannot deduct expenses related to your home office. But if you have a gig next door and you use part of your house exclusively as your primary place of business, you can deduct your expenses – including your mortgage or rent, insurance, and maintenance costs – for that. part of the house.
Suppose your home office is 200 square feet of your 1,000 square foot home. You could deduct 20% of your housing expenses. (Check with IRS Publication 587 to make sure you are following all the rules.)
You can also deduct expenses such as computer equipment, meals, travel, and your cell phone if they are for business use. But keeping careful records is essential so that you can show that the expenses are related to the business rather than to people. If you are not sure what is allowed, be sure to check with a CPA.
What should you do with your saved money?
Assuming you don’t need your side income to pay your bills, focus on investing your money where you can get the most return. If you have high interest rate debt, like credit cards, this is the best place to start. The average credit card APR for cardholders with a balance is over 16%, so every additional dollar you pay above the minimum essentially gives you a 16% return.
If you don’t have high-interest debt and have an emergency fund of at least three to six months, consider investing your odd-job economy income on the stock market. If you earn $ 500 per month, you could maximize your Roth IRA by contributing $ 6,000 in 2021 (although if you are over 50, you are allowed to contribute $ 7,000). If you invested $ 500 per month and got 10% annual return, you would have just over $ 1 million after 30 years. Your total contribution? Only $ 180,000. If you are putting some money in the bank on your end, you might want to take it a step further and open a retirement plan for the self-employed.
Whatever your goal, a side activity can pay off big for your financial future. If you approach your job strategically, you will reap greater rewards.