It may sound counter-intuitive, but if you’ve been thinking about starting a side business, it’s important to be financially prepared.
Starting a Side Hustle? Don’t Forget To…
“While having some extra funds in your bank account sounds amazing, remember that it takes money to make money,” writes Damian Davila, the post’s author.
“Without careful planning, your new venture may actually put you in a worse financial position than you originally were!”
Here are our favorite tips from Davila:
Plan Ahead for Business Expenses
Whatever business venture you’re embarking upon, you’re going to have expenses.
“While your employer may approve of your side job, you shouldn’t use their office supplies and equipment to pursue your side job,” Davila says.
We definitely agree!
Make sure you budget for everything you’re going to need — from business cards to website hosting and networking events.
If you want to keep costs low, here’s how to start a business with less than $100.
Calculate Additional Income Tax Withholding
One of the toughest things about starting a business is figuring out your taxes.
Davila suggests using “the IRS Withholding Calculator to estimate how much more you should be withholding from the paycheck of your main job to cover your income taxes.”
“I’m a freelance writer when I’m not working full time here at The Penny Hoarder. I’d never thought of having additional income tax withheld from my paycheck to make up for my freelance taxes.”
I’m not sure it’d work for me — given how variable my income is — but it’s an interesting idea.
Open a Solo 401(k)
A solo 401(k)? I’d never heard of one before.
“One of the most missed opportunities by independent contractors, freelancers, and small business owners is to maximize their retirement savings through a solo 401(k),” Davila explains.
“You can contribute up to $54,000 in a solo 401(k) for 2017 and $55,000 for 2016… By making contributions as employer and employee, you use a solo 401(k) to boost your nest egg.”
Want more tips? Visit WiseBread to read Davila’s full article.
Your Turn: Do you plan to start a side hustle soon?
Susan Shain, senior writer for The Penny Hoarder, is always seeking adventure on a budget. Visit her blog at susanshain.com, or say hi on Twitter @susan_shain.