There’s nothing like a looming tax deadline to motivate you to organize the financial details of your business.
finding sorting receipts and tallying expenses, the final days before the deadline can leave many scrambling to get their info together.
If you’ve ever fallen in this camp you probably vowed to be more organized next year and avoid the annual mad dash. Whether that happens ultimately comes down to if you change your behaviours. As Stephen Covey as stated “your habits can either make you or break you” and this is no different when it comes to habits for your money.
If you started a side hustle to help boost your income or create the highly coveted financial freedom today we’ll take a moment to check in to see if your habits are helping or preventing you from meeting your goals.
Before we dive in, here’s a quick disclaimer: I’m not a financial expert, guru or accountant. These tips are based on my personal entrepreneurial experience and consults with professional finance pros. Please consult a certified financial expert before making any changes in your biz especially when it comes to your accounting practices.
Great now that we’ve got that out of the way here are some tips to help you become the financially savvy hustler you were born to be.
Bad Habit #1: You Don’t Know your Numbers
Keeping track of your earnings and expenses is not only necessary for tax time but it’s a necessary part of running a business. You’re hustling everyday for a reason and even if you plan on keeping your business in hobby status knowing the amount of money that’s coming in and going out each month will help you figure out if you’re meeting your goals.
Now if your long term plan is to transition from side hustler to full-time entrepreneur, clarity about your numbers will help you achieve that goal faster by keeping a tight watch on the numbers you need to make that happen.
What numbers are those you ask? Here’s a quick list of what you should keep track of every month:
How much money is coming in – Income
When you have a full time job you can relish in the comfort that a check will be deposited into your bank account on a specific day. It’s probably fair to say that you know the exact number that should be there on said day and who to call if it’s not.
But when it comes to your side hustle earnings, do you have the same clarity? Even if your side hustle income is low or in some cases non existent, get in the habit of tracking your earnings on a monthly, quarterly and annual basis. Not only will it help you see what you’ve earned but having this information will help you identify if the time and effort invested in your side hustle is literally ‘paying off’.
Now, if you’re in the camp where your funds are on the low side, don’t be discouraged. Use this info as motivation and track how you improve over time.
What you’re spending your money on – Expenses
Depending on the business that you’re in, starting a side hustle can cost you next to nothing, but after a few months you’ll see that it takes money to stay in business. Want proof? Look no further:
- Do you have a website? Well you’ll need a domain and hosting.
- Hosting an event? Be prepared to possibly pay for a venue and refreshments.
- Want to get the word out about the event? You’ll need to advertise – hello Facebook Ads
Being in business costs money and little things will definitely add up over time. Whether it’s a simple mail subscription or big ticket item like a new laptop, take note of all of the expenses that you’re incurring for your business.
Action Item: Start tracking your key financial metrics. You can start with a simply spreadsheet or check out our Side Hustle Toolkit for some of our recommended programs to help you track this information.
Bad Habit #2: You don’t have a tracking system for your expenses
Now that you know you need to keep track of where your money is going, it’s time to take it one step further and make sure your receipts are in order. When the tax deadline is approaching the last thing you want to be doing is digging through emails or a shoebox to find your receipts.
Need some help on what expenses you should keep an eye on for tax prep? This is where a finance pro can help you maximize your deductions. I personally love Shannon Lee Simmons who provides an awesome overview geared for freelancers, bloggers and side hustlers which you can check out below
Action item: Get organized by creating a monthly tracking system. I’ll readily admit that sometimes I slack off and end up organizing my receipts months after the fact. In 2015 I vowed to get organized by tagging expenses the moment they come in by using tools such as expensify to take a photo of receipts and using my gmail mail to file online receipts. Using a label I tag each receipt with the name ‘Business Expense/year’ so I can quickly find them to add them to my tracking system.
3. Bad Habit #3: You don’t have a separate account for your earnings
The easiest way to lose track of your finances is by lumping all of your money together. When you’re making a healthy side hustle income, especially if you’ve formally registered yourself as a business, a separate income is a good practice to have greater control over what you’re spending and making.
If you use credit cards, go one step further to designate a separate card for business expenses. You’ll find it a lot easier to identify your expenses when you don’t have to sort through statements that also have personal items on them.
This especially comes in handy when you use accounting tools such as Wave or Freshbooks that allow you to link your bank account information and automatically download transactions.
Action Item: Create a separate account for your business earnings or expenses. Worried about the extra fees? Look for low or no fee accounts and if you’re a registered business the fees can count as a taxable deduction.
Bad Habit #4: You’re not putting money aside for taxes
Before you pocket those side hustle earnings, don’t forget to put some aside for taxes. Yep, if you’re earning extra money on the side you’ll have to report it and depending on how much you’re earning you’ll need to pay the government their money.
If you’re a Canadian entrepreneur there are further complexities because you’ll need to start collecting HST the moment your business earns $30K in ANY given twelve month period. So when you charge HST on a product you don’t keep it, you’re basically holding it for the government to pay them back. Need more info, I’ll let Shannon break it down
Bad Habit #5: Not knowing how much money you need to meet your goal
If you’re anything like most side hustlers, leaving your day job is one of your top goals. That’s why it’s important to know the magic number to help you make that happen.
Whether you want to leave your job altogether or drop to part time status, do you know how much money you need each month to pay for your expenses and how long it will take you to get there? Clarity is powerful and will help you hustle with confidence and intention.
Action Item: Fuzzy targets don’t get hit. Identify your magic number. It could be the amount you need to make per month or to purchase something special, either way write this number down along with your goals and look at it daily.
Are your money habits helping or hurting your business? Share the secrets that help keep you on track below in the comments!
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