How to plan for successfully growing income with side gigs
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Landing an awesome job is great. Snagging a second gig is even better, especially when you can really use some extra cash flow. When you start adding in a third, fourth, or even fifth side gig, it takes some serious planning to keep your multiple income streams organized so that you can keep your clients happy and get the most out of your money.
An increasing number of Americans are either taking up a side hustle or joining the gig economy to get by. According to Zippia, 45% of Americans have a side hustle in 2023, with that number rising to 49% for workers under 34.
In fact, there are so many people creating thriving careers out of multiple jobs that Antowoine Winters, an Ohio-based certified financial planner with Next Steps Financial Planning LLC, caters his business to freelancers and other clients who make a living through several sources.
“It gives people a lot more flexibility so that they can build a life out like they want it,” he said. “For years, you have people that go to work, they work at the same place forever, and then, the last several years, we’ve seen this transition away from that.”
Winters said his clients found they couldn’t make ends meet with just one full-time job or even two. The most burdensome financial culprits, he said, are often student loans, car payments, and housing costs. Many of his clients who are scraping by choose to work several gigs at a time to earn money for travel, dinners out, or even just a movie once in a while.
‘Give your gig a job’
Not always having a concrete income stream or, in many cases, the security of medical insurance and a 401(k) plan, means workers relying on the gig economy need to get and stay organized to be successful.
Winters tells each of his clients right off the bat, “Give your gig a job, as strange as that sounds.” That means each gig should serve a purpose. He recommends starting off with a base job—something steady and reliable, possibly in your preferred field and maybe even one that offers health insurance or other benefits. “Then just start building off of that.”
Once an anchor client or position is secured, then assign your gigs to the items in your budget—for example, Uber for utilities, dog walking for groceries, transcription services for insurance, part-time teaching for car payments, etc.
And if you have to make a large purchase, such as a down payment on a car or buying a new computer, then budget using gigs. His photographer clients, Winters said, often budget for new equipment by taking on extra wedding gigs or shooting a bunch of high school senior portraits knowing ahead of time that the money will go towards their purchase.
“Thinking a little bit ahead and going, ‘Okay here are the things that I need’ and starting to find the jobs to fit that specific need—it becomes more tangible for you,” he said.
Treat your gig work like a business
Once you have laid out a budget and landed the gigs to pay for it, bookkeeping becomes both a priority and a necessity.
“I recommend everybody consider it as a business because that’s what the IRS considers it as,” said Cary Cates, a tax advisor and certified financial planner with Cates Financial Planning LLC. “You’re going to track your income, you’re going to track your expenses.”
Cates, whose business is located in the Dallas-Fort Worth area, said he too has seen an uptick in clients who take on multiple jobs to make ends meet. “It’s an attractive prospect,” he said. ”Get hired and start earning money immediately, versus a typical 9-to-5 job that requires a lengthy application process and multiple interviews.”
Many of his full-time gig clients are just starting out and facing both student loans and skyrocketing housing costs. “They’ve risen pretty dramatically,” Cates said of housing costs, “especially in the entry-level end of the market over the last three or four years.”
When every penny counts, organization is critical to keeping your bottom line in the black and remaining in good standing with the IRS. That means tracking your invoices, your payments collected, and any work-related expenses you might incur, even including items like printer ink or mileage on your car.
“Getting paid in cash under the table? You still have to file your taxes,” Cates said. Any company that pays you $600 or more in a year will file a 1099 with the IRS. If you don’t report that income and file your own 1099 that the company sends you, you could face stiff fines and penalties.
The other caveat to accepting cash that goes unreported is that if the IRS sees you deducting your business expenses without reporting your income they can designate your business a hobby. If that happens, you’ll lose your ability to deduct expenses, Cates cautioned, which could cost you thousands in the long run.
Employ a business tracking app
“There’s a whole plethora of accounting options out there,” Winters said. “The biggest thing is just finding tools that help them be efficient in that process.” Both Cates and Winters recommend business tracking apps such as Everlance, MileIQ, Quicken, QuickBooks, or FreshBooks that allow you to do everything you need to, such as log hours and mileage, send and organize invoices, track payments, and run business reports.
“Once they do that, it’s very easy to track everything and get all the deductions they qualify for,” Cates said, adding that he recommends clients also set up a business checking account and open a business-only credit card for purchases.
Budget your time
Once you’ve started working and collecting on these income streams, figure out a schedule for managing your finances in between.
Winters sets aside an hour every Friday just to tackle his bookkeeping and he recommends his clients do the same. This is when he invoices clients for jobs he’s completed, updates his spreadsheets, logs his payments and expenses, and generally gets his financial house in order.
“One of the things people hate doing is balancing their own checkbook, but it’s, unfortunately, a necessary evil,” he said. “You can have all the clients in the world, but if you’re not keeping up on invoicing them it doesn’t help you. You’re working against yourself because then you’re going to start missing your payments.”
Plan for your future
Working multiple gigs offers a lifestyle of flexibility and control over your own career. But it doesn’t afford you some of the long and short-term perks that a full-time job with benefits would. So, it’s up to you.
In the immediate short-term, Cates suggests paying your taxes quarterly so you aren’t fined by the IRS. While W-2 employees have taxes taken out of each paycheck, freelancers are supposed to pay estimated taxes to avoid underpayment penalties.
Plus, Cates added, it’s better for your bottom line to pay a little bit at a time. "It’s never fun getting hit with a $15,000 tax bill at the end of the year,” he said. “It’s much better to pay that throughout the year on a quarterly basis.”
One strategy for gig workers and freelancers who will have to pay a tax bill at the end of year is to move money right into a Savings Account each month. Varo’s Save Your Pay automatic savings tool enables you to put a percentage of each direct deposit right into your Varo Savings Account without having to do it manually.
Freelancers, especially those in it for the long haul, also need to plan for their future without the benefit of a 401(k). The good news, Winters said, is that gig workers can set up their own retirement account, and not just a Roth IRA. There are several self-employment options, including a SEP-IRA, which allows you to save pre-tax and is set up for freelancers and small business owners.
Even if you are piecing together multiple income streams to make ends meet, even a little money in a retirement account can go a long way. “The sooner you start saving for your retirement, the less you ultimately end up having to struggle with it,” Winters said. “The dollar that you saved at 29 is going to grow to far more than the one at 49 will.”
Whether you’re already working one or more side gigs, or ready to get into the side gig game to supplement your income, remember that proper organization is key when it comes to managing multiple income streams and staying on top of your finances. After all, it shouldn’t just be about keeping your clients happy—you need to look out for yourself and your financial future while you’re at it.
Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.
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