Once your side hustle starts making a profit, there is a chance to set up a plan that could help you earn more than $200,000.
When your side hustle begins to bring in extra income, you reach a turning point. One path can lead to lifestyle inflation, missed opportunities, and financial regret.
The other path can lead to smart growth of your savings and investments, giving you a faster way to reach financial security. There are four important steps you need to get right to choose the smarter path for your future.
Review Your Savings Plan
When your side hustle starts producing extra cash, the first thing you should look at is your savings plan.
It is easy (and very common) for extra income to blend into your everyday spending, because there is a natural sense of relief when you make more money.
You should enjoy the rewards of your hard work, but it is also important to find a way to save some of the money. Saving is critical if you want your side hustle to help you move forward, rather than just maintain your current lifestyle.
The key is to have a clear plan for how to use your extra income, make sure your important spending needs are covered, and set up a simple system for how you manage your banking to make saving easier.
This opportunity is real.
If you manage to save just $25 a day and invest it based on the long-term average sharemarket return of 9.8 percent, your money could grow to around $12,600 after one year.
While this might not seem like a huge amount, if you keep saving $25 every day for 10 years, your money could grow to about $202,515.
And if you continue for even longer, the results become even more powerful. After 20 years, the amount could grow to $739,964, and after 30 years, it could reach $2,166,286.
This shows how a small profit from your side hustle can turn into a life-changing amount of money over time.
Set Your Investing Goals
Most people do not realize what is possible when it comes to investing.
As you can see from the examples above, even small amounts of money, when invested regularly and consistently, can lead to large gains over time.
When you understand what is possible and how much wealth you can build through investing, you will feel more motivated to stick with your plan.
You can use a compound interest calculator, such as the one provided by the government’s MoneySmart website, to see how different savings amounts can grow over time. This can help you stay excited and focused on reaching your financial goals.
Review Your Tax Setup
As your business starts to grow, your tax setup can help you keep more of the money you are making.
When you first started, you might have chosen a quick and easy setup, but now that your side hustle is making real money, it is time to rethink if that setup is still the best option.
You should consider if you should continue as a sole trader, or if it makes sense to set up a company, a partnership, a trust, or a combination.
The goal is to structure your income in a way that matches how much you are making now, how you are investing, and how you expect your business to grow in the future.
There is a big opportunity here. For example, the small company tax rate is 25 percent, while the personal tax rate for sole traders can be as high as 47 percent. Choosing the right setup means you can keep more profit to grow your business, build your personal wealth, or both.
Also, the accountant who helped you get started may not be the best fit for helping you take your business to the next level.
That is not a bad thing. It simply means you and your business have grown and are ready to move up.
Get Your Planning Right
Planning for your business is important, but it is just as important to have a plan for your personal money and assets.
You need to know where you are today, how things might change over time, and what steps you can take to get ahead, create financial security, and eventually have the freedom to work the way you want.
There is no single path that works for everyone, but there is a best path for you.
The right plan depends on your current situation, your goals, and how you expect things to change over time.
By looking at all your options and choosing the best path for you, you can make sure you are not only profiting from your side hustle but also building confidence and taking full advantage of the opportunity.
Take the time to map everything out on a spreadsheet, or get professional help. Since the focus would be on your business, the cost of getting professional advice is likely to be tax-deductible, meaning you could save on taxes and get ahead faster at the same time.
The Final Word
A profitable side hustle is a serious financial opportunity, but only if you treat it that way.
Take control of your savings plan, set investing goals that can make a real difference, get smarter about your tax setup, and create a clear plan that brings everything together.
The same side hustle can lead to very different outcomes depending on how you handle it.
