Don’t make these financial mistakes with your side hustle

Don’t Make These Financial Mistakes With Your Side Hustle

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NerdWallet If you have a job and a side gig, avoid these common pitfalls. Whatever your side hustle, make sure you have a plan for the money. This feature is powered by text-to-speech technology. Want to see it on more articles? Give your feedback below or email [email protected] . This article is reprinted by permission from NerdWallet . At the beginning of the year, many people have their eyes set on goals. Some of these goals may include increasing your income, starting a dream business, or both if you’re reaching for the stars. Before you get your hands dirty in the sometimes chaotic combination of formal employment and entrepreneurship, here are a few pitfalls to avoid. Not having a plan for your side hustle income People get side hustles for different reasons. It could be to help make ends meet, save toward a dream vacation or grow your business to a point where you can quit your job. Catching up on my retirement savings is one reason I decided to start a side hustle. But you need a plan for that motivation to help make your side gig worthwhile. Think about having goals for your income and a strategy in place to help you achieve those goals. For instance, you could divert funds from your side hustle into retirement savings accounts like an IRA. This is a way to put away more for retirement, and you could reduce your taxable income, depending on how much you make, because contributions may be tax-deductible. The plan I conjured up thanks to my side gig income is increasing my 401(k) contributions at my full-time job so I’m on track to max out that account this year. I also opened a SEP IRA, a simplified employee pension plan , for 2023 to put more money away for retirement and potentially reduce my taxable income. Advertisement Eric Nisall, an accountant in Coral Springs, Florida, suggests having what he calls a “failure fund” if your goal is to eventually transition into full-time entrepreneurship. It’s something he developed when he began the journey of full-time employment and building a business. “When at my last two CPA firms, I was working at building my own business at the same time. I realized, if I’m going to do this, I need to start putting money away so that if I don’t grow, I [won’t] suffer,” he says. Nisall put money he saved from coupons and any extra bucks he made from a raise or overtime into that fund. Plus : 6 ways retirees can bring in extra income Not being aware of tax implications Oftentimes, people think having a side hustle means they can make extra money without reporting it, says Atiya Brown, a certified public accountant and certified financial education instructor in Dallas. “I think that people need to realize all of their income is going to be taxed,” she says. “So, if they’re starting a side hustle, they need to get organized so that they don’t […]

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