🎓 Should you start a side hustle?

Basics of a Side Hustle

A side hustle is basically another form of income outside of a full-time job that you generally run yourself kind of like a business. A side hustle can be a great way to make extra money but is not for everyone and every situation.

Side hustles can range from mowing lawns to selling a digital product online. A lot of people will pursue a side hustle in something they are also somewhat passionate about. Someone who loves pottery might sell their pottery online or at flea markets. Someone who loves technology might start a phone repair side hustle in their garage.

Side hustles also can come from resources people have at their disposal. I have heard of people making very good money hauling stuff around because they own a big truck and a trailer. It just depends on what you are good at and what resources you have.

People start side hustles for a few different reasons but some of the main reasons are to make some extra money or to pursue a passion of theirs and hopefully make money from it

A warning about side hustles

Many people start side hustles because they sound exciting and not because it is actually the most efficient way to make some extra money. Here are some questions you should ask yourself before starting a side hustle for extra income…

• Does it make more money than my job?

• If it does make more money than my job why is it not my full-time job?

• If it makes less than my job then why don’t I just work more hours?

• Do I enjoy this more than my job?

• Is it actually a side hustle or just a hobby?

Many people will start a side hustle even when it makes much less than their job and they could easily just work more hours. Now if your side hustle is more of a hobby you want to identify it as a hobby, not a side hustle otherwise you might find yourself making sacrifices for your hobby that are not worth it.

A side hustle is also not for everyone even if it does make more than your job. You also need to be a motivated self-starter in order to make a side hustle actually work.

So is a side hustle for you? Well maybe, maybe not. Either way let’s now talk about how a business or side hustle could complicate your financial situation and how you could possibly save hundreds or thousands with one.

How a business affects your personal finances

A business can greatly complicate your personal finances because the way businesses are taxed is completely different than how a W2 is taxed. A business can also let you write things off as business expenses such as certain cars or even vacations if you know how to do things right.

Let’s get started by talking about the downsides of a business on your personal finances. A business greatly complicates your financial situation and will make tax season much more stressful. You might also want to hire an accountant to take some of this stress off but that can definitely cost you a good amount.

If you rely on a business for some or all of your income you can have a tough time because a business is much less steady than a W2 meaning you might have months that generate tons of money and other months where you barely make anything. This means you need to be much more on top of budgeting and saving money for rainy days because you will have many more rainy days with a business.

Even with unsteady income and a more complicated tax season, there are plenty of benefits other than the extra income a business can produce. The single most important benefit of owning a business is tax write-offs. You can avoid paying taxes on tons of regular expenses by writing them off as business expenses. This means if you can justify something as a business expense and you double check to make sure it is allowed you can legally pay much less in taxes than regular W2 employees.

Things you can write off include certain kinds of cars, you can write off vacations as business meetings, you can also write off your technology, and anything you use for your business as expenses.

Along with being able to save thousands of dollars by writing personal expenses off as a business expense, you can also make money by spending money with a business. Did you know that credit card rewards are normally not taxed? This means if you run a large business and you have a cashback credit card you can use the cashback from the card for your personal expenses. This also means you could technically run a business that always breaks even and still make enough money to live off it just from credit rewards.

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