Side hustles have grown in popularity in recent years. Once considered a niche, they’re now a common tactic for bringing in a little extra cash alongside one’s main job. This extra money can be great for accomplishing or accelerating certain financial goals, like paying down debt, building up an emergency fund, or even saving for retirement.
If one of your New Year’s resolutions for 2025 is to build up a dependable side hustle, I commend your effort and wish you the best! Here are some important financial planning considerations, tips, and ideas to keep in mind as you progress.
#1. Choose a Side Hustle
Admittedly, this can be a bit daunting, as the options are seemingly endless. Some require very limited skills or setup, while others demand considerable knowledge or abilities. You’ll need to evaluate your strengths, financial resources, and time commitments to make a choice that fits your situation.
For lower-entry side gigs, you might try things like delivering for Uber Eats, DoorDash, or Instacart. There are even dog-sitting apps (Rover, for example) where you can get paid to care for someone’s pet.
For those interested in a higher level of entry, you have virtually limitless options for starting a small business. You can make and sell crafts on Etsy or Shopify, flip furniture for profit, and so much more.
One word of caution: If you’re going to use your professional expertise as a side hustle, double-check that your employer doesn’t have any rules against moonlighting or that you wouldn’t be in violation of any employment agreements you signed when hired.
When choosing a side hustle, be realistic, leverage your strengths and natural abilities, select something you can reasonably expect to profit from, and manage your time wisely.
#2. Track Expenses and Report Income
First and foremost, it’s a good idea to keep your side income in a separate bank account. This helps prevent the money from muddying up your budget and gives you a clear view of what you’ve brought in.
Unfortunately, the IRS does not have an exemption for side hustle income. They don’t treat it differently from any other income. If you decide to do gig work for Uber Eats, DoorDash, Instacart, or Rover, you’ll most likely receive a Form 1099-K and need to report that when filing your taxes for the year.
If you decide to start a small business, the good news is that you can track and deduct legitimate business expenses, reducing the reportable profit for that year. For example, if you make and sell quilts, you can deduct your fabric, sewing needles, and other related expenses from the revenue you have to report.
No matter which route you take, carefully track your expenses and income. You’ll want to do this not only for tax purposes but also to understand how much you’re earning relative to the time you invest. For example, if your side hustle is only bringing in $5/hour after all expenses, it’s safe to say there might be a better use of your time.
#3. Decide What to Do With the Money You’ve Made
You’ve worked hard for this extra money—congratulations! I encourage you to enjoy some of it as a reward for your efforts. Doing so can be a great way to stay motivated and avoid burnout.
For most of these funds, however, I would encourage you to put them toward a meaningful financial goal, like paying down debt, building emergency savings, or investing for the future.
The key is to strike a balance: enjoying the rewards of your efforts while using your hard-earned money as a tool to build a more stable and prosperous future. By focusing on meaningful financial goals, your side hustle can become more than just an additional income stream—it can be a catalyst for achieving your dreams.
