If you have a side hustle, you need to know how to track and manage your side hustle income – because it’ll save you time, money, and so many headaches at tax time.
You guys know I’m a huge fan of tracking your personal spending, because it’s legitimately the best way to get a hard look at where your money is actually going, and it’ll be insanely great at helping you manage your money.
It’s no surprise that I’m also a pretty big stickler for tracking (and managing) your side hustle cash, but what is surprising is how much more I rely on automation to do it.
Because fun fact: if you run a profitable side hustle on top of a day job, your time is at a premium.
So while I highly recommend manually tracking your spending if you’re just getting started with personal-finance-101, I wanted to share how I manage and track my side hustle income—and the tools that save me, no joke, hours every single week.
Hours I can spend working!
(Or binge-watching Netflix, let’s be serious. I firmly believe in leisure time.)
Automate As Much As Possible
If you have a full time job and a side hustle, your time is at a premium (and if you’re doing it right, you’re charging that premium for your side hustle skills.) So if you can save even an hour a week avoiding administrative tasks and let the internet and its magical software stuff handle them for you? That’s a good (and lucrative) deal.
I use software to handle what I used to manage with a hacked-together combination of spreadsheets and PDFs: invoicing and expense tracking.
The fact that putting together an invoice now takes me 3 minutes, tops, saves me about 27 minutes per invoice. On top of that, you can connect most modern invoicing and accounting software directly to your business account or credit card to import all of your expenses for you.
Data entry is so not worth your weekends, but it does have to get done, and this is a great way to get the best of both worlds.
Get a Business Credit Card – And Automate Even More
If you’re side hustling, and you’re going it as a sole proprietor (as opposed to incorporating) this is literally as easy as getting one extra credit card you only use for business expenses. At least, that’s what I did, anyways.
Once you’ve chosen a card and dedicated it to your side hustle spending, you can hook it up directly with your chosen accounting software, and it’ll keep track of all of your expenses by importing them automatically.
Now all you have to do is log in and make sure the expenses are being categorized properly (spoiler alert, a lot of the times they aren’t) and you’ve got accurate records of what you spent on your business so far this year.
That’s how I’ve been keeping tabs on my expenses and business spending for years now, and I’m never going back you can’t make me.
Keep Meticulous Records (Because Taxes)
Tracking your earning and spending is important for personal stuff, but it’s critical for side hustle stuff—aka, your business revenue and expenses.
If you have meticulous records of the money you earned and spent in your business, you’ll save yourself or your accountant so much grief at tax time.
On the expenses side of things, you’ll also save yourself a ton of money: You can reduce your tax bill by claiming any eligible expenses against your side hustle income. Whether you DIY using a tool like Simpletax like I do every year, or work with a pro accountant, having clear records of what you spent and when, on which categories in your business, is going to make someone’s job way faster.
If it’s yours? Amazing.
If it’s your accountant’s? Guess who just became their favourite client.
Everyone loves being the favourite, you guys.
Yes, I was that girl in school, I hope we can still be friends.
Invest Back Into Your Side Hustle
I’ve written about this before, but investing in yourself —and in your side hustle—is one of the highest value things you can spend money on if you do it in a smart way.
Think about “regular” investing. To really do it well, you need to understand how a business makes money, and how it’s performing, right? Well, there’s no business you’ll ever know more about than yours. If you do your research and know that a specific type of spending will help boost your business, you’re probably right.
The way I’ve handled it this year is that I set aside a specific percentage of my earnings from my side hustle to cover my expenses, and invest back into the blog. For every invoice that gets paid, I put 20% of it into a separate savings account for expenses.
That’s what I use to pay for my software expenses, like my email software, and it’s what I use to pay for bigger expenses, like booking travel or upgrading equipment.
Pro tip: I use the Profit First approach, which is covered in all the detail you need in the book, Profit First. It’s been a total lifesaver to me, my business, and my overall finances, and yes that’s an affiliate link but I don’t even care if you use it, just please read it somehow if you run a business. The library has copies! It is honestly an essential text. Read it.
Save for Taxes (Because Taxes)
Speaking of things I do every time an invoice gets paid, I also set aside a percentage of that money to pay my taxes, because I’m a big fan of a) the things our taxes buy us, like healthcare, and b) I’m a big fan of being able to handle a tax bill if one comes my way.
For now, I’m putting aside my marginal tax rate on any new invoices that get paid, and keeping an eye out to make sure that tax rate doesn’t jump into the next marginal tax rate bracket. If it does, I’ll adjust as needed.
… And Treat Yourself
After taking care of my taxes and investing back into my biz, the rest of the money that comes in is up for grabs in my budget.
I’ve got a list of priorities in place for any “extra money” that comes into my budget, so I usually know exactly where I’m directing that extra cash.
But sometimes, things come up or fun opportunities present themselves, and when they do, I’m not opposed to redirecting my treat yourself side hustle cash to something even more fun than saving for a goal.
It Doesn’t Have to Be Perfect
All this said, how you track and manage your side hustle income doesn’t have to be perfect, as long as it works for you. My system is decidedly not optimized as far as it could be.
I chose my credit card because it was one I already had. Literally, when I called to cancel an annual-fee credit card, they were able to waive the fee if I signed up for their basic card. When I finally got around to dedicating one card to business expenses, I chose that one because it was already there – not because I did an extensive comparison of which one would earn me a marginal amount more points or cashback.
Should I compare my credit card and choose one with better rewards? Probably. But do I need to do it in order to make my side hustle systems work? Nope.
I could probably find a cheaper option for invoicing and record keeping. There are free alternatives to my current software that are very good, with great interfaces, and come highly recommended. But when I sat down to really look at them, they took a bit more accounting skills than I have—or, to be honest, want to have. My current option is a happy medium for me and the size of my business right now, where I don’t need a professional bookkeeper (more expensive) and I don’t need to sit down and figure out how to do accounting for real (more time). If my business grows? Sure, I’ll switch.
For managing a side hustle? It’s pretty perfect for me right now.
Can you give me the TL;DR version?
If you need to manage your side hustle income, here’s what to do.
- Automate as much as you can with a system that works for you
- Use one credit card for all of your side hustle expenses
- Keep meticulous records of what you spent on your side hustle (aka, business expenses)
- Save for taxes
- Invest some money back into your biz
- Treat yourself
That’s it! That wasn’t so hard now, was it?