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Put your extra cash to work for you
Side hustles are a great way to earn some money on the side. And since the money is usually not budgeted in with your monthly income, you have some freedom to decide where it should go.
You can use this money to help pay your bills or to enjoy a night out, but there may be better ways to use it. Instead of using side hustle cash to improve the now, why not use it to improve your future? Consider these options for your side hustle income flow.
Pay off debt
Imagine all of the date nights you can afford when you do not owe so many people. Making a debt repayment plan and putting your side hustle income to work on that plan can improve your life for years to come.
Build a rainy day fund
Everyone needs a rainy day emergency fund because everyone has rainy days. The rule of thumb is to have three to six months of expenses socked away for emergencies. This is much easier to do when you do not have to squeeze it out of your regular income.
Save for a big purchase
Do you want to buy a house or a new car? Maybe you have had your eye on a new tablet or TV. Some people even want to turn their side hustle into their full-time job. Whatever the case may be, save your side hustle cash for your big purchase or life-changing career move.
“The rule of thumb was once that you should have $1 million put away for retirement, but that rule is quickly changing. It seems that $1 million will not be enough for people to live comfortably anymore. Lucky for you, you have some side cash coming in to help you pad your retirement account.”
Save for retirement
Unless you want to work for the rest of your life- either at your regular job or in your side hustle, you need to save for retirement. The rule of thumb was once that you should have $1 million put away for retirement, but that rule is quickly changing.
It seems that $1 million will not be enough for people to live comfortably anymore. Lucky for you, you have some side cash coming in to help you pad your retirement account.
A good mix
The truth is that you can do many things with your side hustle money, but the smartest might be to use it for more than one thing. Here is a sample guideline to follow:
25 percent for taxes
Sorry, but Uncle Sam wants his cut of side hustle money, too. Most freelancers and others who make extra cash save anywhere from 25 to 30 percent of that income for tax purposes. You may find that you do not need that much, but it is always better to be safe than sorry.
Save 50 percent
The amount you save is up to you, but you should set a goal so that you have something to work toward. Consider saving at least 50 percent of your side hustle cash, as this will help you make a dent in your financial goals.
Be smart about where you save, too. It may be simple just to put it into your regular savings account, but if that account earns little interest, you are doing yourself a disservice.
Consider either looking for a high-yield savings account or even a money market account. Doing so will be putting the money you earn to work for you.
25 percent to spend
You can still reward yourself for the hard work you have done by spending some of it. Rewards can motivate you to keep pushing yourself. After you have taken care of the previous steps, spend what you have left.
A deeper dive- Related reading from the 101:
Learn more about what you need for retirement.
Here are 5 side hustles you can check out.