Mastering the side hustle: how to do it, make it worth your while and keep the taxman satisfied
Multiple streams of income are often heralded as the secret to getting rich and living a fulfilling life
YouTubers can make thousands without a traditional 9-5 job, property investors can make money while they sleep, and many bloggers earn a passive income without having to create new content.
But is it as easy as the influencers want us to believe?
Freedom, flexibility and security
Wealth isn’t the only benefit that can come with multiple income streams.
This type of lifestyle can give you stability and security too. If you were to lose one job, you’d have others to fall back on.
If some of your earnings are generated even after the work is complete, this is called passive income and might mean that you find it easier to take days off, spend time with your family and focus on life goals that have nothing to do with your career.
What’s more, the extra money could mean that you’re able to afford early retirement sooner or get to a stage of semi-retirement where you no longer need to work but occasionally take on paid projects you’re passionate about.
Sounds pretty great, doesn’t it?
Highlight Wealth isn’t the only benefit that can come with multiple income streams
It’s not as easy as social media makes it seem
Unfortunately, getting to the point where you’re making money while you sleep takes a lot of work.
Diversifying your income can be physically and emotionally draining, particularly at the beginning when you need the stability of a full-time job to pay your bills and put in the extra hours in the evening.
This can be especially challenging if you’re a parent or have other responsibilities such as caring for elderly loved ones.
While social media might make other people look like side hustling superheroes, it’s worth remembering that most people would find it hard to juggle multiple jobs at once.
Burning the candle at both ends isn’t a long-term strategy so go easy on yourself and get plenty of rest.
Remember that each income stream could take years to build.
Instead of saying ‘I’m going to build three income streams in the next three years’, focus on adding just one new project at a time and be realistic about how long it’ll take.
Passive income streams aren’t passive in the beginning
From adding affiliate links to your blog to building up enough funds in your investment account that your money makes money, there are plenty of passive income streams that pay you even when you’re not working.
However, it can take months or even years to get to a stage where you can ‘set and forget’ a particular income stream, so be patient.
Even when it becomes largely passive, there’s likely to be a level of management required to maintain it and ensure it stays profitable.
Nevertheless, once you’ve got these passive income streams mastered, it can give you some breathing space to focus on other things
Monetise existing skills before investing in new ones
‘Why don’t you learn to code?’ is a phrase often used to encourage people to master valuable skills that can easily be monetised.
It’s true that coders tend to be highly employable with the potential to earn a large salary but learning to code for the money alone is unlikely to lead to long-term happiness unless you have a keen interest in building websites or programming computers.
In other words, it’s probably worth making use of existing skills before investing in new ones.
If you’re a talented graphic designer, you could offer your services to brands, sell prints, teach beginners or create merchandise.
If you’re a writer, you could pitch your ideas to magazines, transcribe journalists’ interviews, and edit job seekers’ CVs.
If you love fashion, selling clothes online and managing retailers’ social media accounts could be exciting avenues to pursue.
If you’ve got a passion for baking, upholstery or making your own jewellery, selling your creations online could become an additional source of income.
Signing up for online courses or educational programmes that you’re not actually passionate about will only leave you feeling resentful every time you have to sit down and do the work - so carefully consider your passions before you take the leap.
Burning the candle at both ends isn’t a long-term strategy so go easy on yourself and get plenty of rest
When branching out and exploring new income streams, it’s wise to explore the tax implications and get a rough idea how much needs to be paid.
Thankfully the government has a series of tax-breaks which may help you increase your income without too much admin.
For example, the government’s Trading Allowance was created so that those who earn less than £1,000 a year from self-employment don’t need to declare it.
Those who earn more than this figure must fill out a self-assessment tax return.
There’s also the Rent a Room scheme. If you have a spare bedroom and you’re happy to share your home with a lodger, you could earn up to £7,500 a year in rent without having to pay any tax.
Don’t sacrifice stability in pursuit of your dreams
Whether you’re a writer, designer, model or you’re in the early stages of creating your own fashion brand, there can be a lot of pressure to only take on jobs that are relevant to your chosen industry.
As we reported earlier this year, ‘Insta gurus’ might suggest you ‘take a leap of faith’ and quit your day job to pursue your dreams.
But before you follow their advice, think about the stability and security you get from employment - even if you don’t enjoy what you do.
Keeping hold of less glamorous income sources can give you structure and peace of mind while you explore more entrepreneurial projects.
Finding new sources of income can be challenging but by taking baby steps towards your goals, you can increase your income without burning out.
With each income stream, your financial situation should improve - especially when you embrace passive sources that top up your bank account without you having to pay too much attention.
3 things to do right now...
Find a certified or chartered accountant who can handle key financial functions such as bookkeeping and tax returns to ensure you don’t get yourself in trouble with the taxman. Find one at the Institute of Chartered Accountants in England and Wales or Institute of Chartered Accountants of Scotland.
If your income is unpredictable, creating a budget can seem like an impossible task. Check out our guide to pulling it off.
If you're earning more than £1,000 from your side hustle you're classed, for tax purposes, as 'self-employed' and will have to register as a sole trader. You can hold this title alongside your 'employed' status and it means you will have to complete a tax return.
Please share this with someone who'd benefit from it.
Don’t forget that while you may think that this article is brilliant, it is intended for information purposes only and should not be mistaken for financial advice or recommendations.