Author Topic: What to do with side hustle money?  (Read 603 times)

treesner

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What to do with side hustle money?
« on: December 17, 2019, 04:20:48 PM »
hey guys I follow all the general FI guidance for my main work income of keeping 3-4 months emergency, 401k match, IRA, investing in VTSAX ect. However with my side hustle cash it tends just sit in the business bank account I created. It's kind of cool to see the number grow however I know it's not doing much for me just sitting there. Is there some guidance on how much of that to keep in cash and what to do with there rest? I think I read something about a side hustle retirement account contribution and that sort of thing.
And when I transfer that money out should I be keeping a spread sheet or something of that?

thanks!

ixtap

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Re: What to do with side hustle money?
« Reply #1 on: December 17, 2019, 04:31:42 PM »
Since you say that you are only contributing to your 401k to match, the most obvious place to start is to max your existing 401k.

You should have clear records for you business accounts, which will allow you to declare your income and deduct expenses.

kpd905

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Re: What to do with side hustle money?
« Reply #2 on: December 17, 2019, 07:13:27 PM »
You can open a solo 401k or a SEP IRA, but it would be much easier to just max out your current 401k as @ixtap said.  This can help you eliminate some of the taxes owed on the side hustle money too.  If you still have money left over after that, then look to the business retirement accounts. 

terran

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Re: What to do with side hustle money?
« Reply #3 on: December 17, 2019, 09:02:29 PM »
There's nothing special about side hustle money. Money is money, so follow the recommended investment order: https://forum.mrmoneymustache.com/investor-alley/investment-order/. If you fill up tax advantaged accounts there are some self employed retirement accounts that can give you some extra space.

Do make sure you keep track of any income from your side hustle as you'll need to report it on your taxes. Also keep in mind that you need to pay both income tax at Self Employment tax, which adds another ~14% tax on all the self employment income, so don't be surprised by that. You might want to increase you withholding from your job to cover the tax you'll owe, or pay estimated taxes in 4 equal installments throughout the year. The easy way to do this is to shoot for one of the safe harbors for avoiding an underpayment penalty. See under "Penalty for Underpayment of Estimated Tax" at https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

Chris Pascale

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Re: What to do with side hustle money?
« Reply #4 on: December 17, 2019, 10:51:10 PM »
In 2015 I made an extra $42k writing Google ads.

$6k was associated with making the money (business expenses, like a new laptop and home Internet - didn't have Internet at home before then)
$10k went into a 529
$5k to stock market gambling
$2k went for a solo trip to Amsterdam to watch my son's friend play soccer

Took the family on a vacation to Chicago
Made a double mortgage payment
Gave notice at a job in November, knowing I was not starting my next one until March. Boss asked me to stay a bit longer, so we split the difference in order to help him with some things, and for me to have a couple months at home