How to Use a Side Hustle to Boost Your Income

Introduction

The advance of technology and the widespread adoption of the Internet has made it much more accessible to operate a side hustle and earn additional income alongside or instead of your main job. The advent of frictionless remote work has given people more time when working from home to pursue external interests and this has meant that many workers have taken up side hustles in order to supplement their income. So how best to negotiate this?

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Why Consider a Side Hustle?

The obvious reason is that the cost of living in the UK has skyrocketed over the last 5 years. Inflation has reached its highest point in decades, and the cost of even maintaining a basic standard of living is now almost out of reach for all but the most well off families in major cities.

Of course, any supplementary income that helps you and your family bring in more each month is a welcome addition. But one extra benefit is that this income can be taxed in a slightly different way - having control over your employment status in your free time means you can shelter these earnings in a company or have them taxed under the Second Job Tax. Of course, you should do your own research before undertaking what might be complicated tax planning, but the implications are that you can reduce your tax basis by taking additional income from a separate job, rather than your main one. Income from a company can also be taken as dividends, which are taxed less than most income tax bands. You can also maximise your company pension contributions and personal healthcare plan if you want to take money out of the company, or roll profit over into new investment for the following year and avoid taking profit.

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Exploring Side Hustle Ideas:

So, the burning question. What are the sort of ideas we’re talking about? Now we’re loathe to go and tell anyone how to start a business, but the majority of side hustles fall into the following 3 categories:

• Freelance
  This usually involves selling your skills in the form of services. Think web-design projects, copywriting, consulting or offline skill-based jobs like photography or odd jobs, perhaps tangential to what you do in your day-to-day job. The advantage of choosing online skills is that you can usually work on them in shorter moments - even lunch breaks, commutes and small chunks in the evenings and weekends when you get time. They don’t require travel, uniform or a particular time of day. Places like Upwork are good for this.
  
  
• Online Selling
  The internet has brought about a proliferation of marketplaces where it is possible to list almost anything for sale. Amazon resellers, dropshipping, furniture and clothing upcycling and more have all become common ways to sell products on the internet. Places like Etsy allow users to sell their beloved creations if they’re new, and eBay if they’re old.
  
  
• Property
  Property investing as a side hustle requires a bit more capital and knowledge to get started. Changing regulations including increased stamp duty for second homes and tax increases have also made buy-to-let properties less attractive, particularly in larger cities where the yields tend to be lower. However, there is always money to be made on the buy side, particularly for those with a predisposition to buying properties in worse condition and refurbishing them. Check out our Property Investment Guide for more details.

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Managing the Financial Flow

As mentioned, it’s crucial as your side hustle picks up steam to manage the new financial inflows correctly. You are aiming to maximise the contributions to your net worth while minimising the amount of tax which you pay. This can seem like it’s conflicting advice, but exposes some important strategies to pursue when adding extra income streams. For example, a higher or additional rate taxpayer would want to be particularly careful when taking more of the profit as income, as it will all be taxed at 40% or 45%. Someone in this scenario would be much better off running their side hustle in a limited company, from which they could take dividends at the much lower dividend rate, or non-taxable benefits like healthcare, pension contributions or even a vehicle.

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Boosting Your Net Worth: The Ultimate Goal

Remember that the ultimate goal is to ease your own financial burden by making additional contributions towards that Net Worth, and maximising the figure you might end up with at retirement or your pre-set financial goal. You can use the Strabo Net Worth tracker to forecast what this will be at certain ages, and the Life Events menu to track how this might be impacted by different side hustles. 

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In Summary: Empowering Your Financial Journey

Although it might seem difficult to earn a load of new income and see this disappear straight away, you should consider this an investment in your financial future. Some of the money could be put towards your day-to-day expenditure, but we’re assuming this has been mostly covered by your day job. A side hustle is about finding that little bit extra to contribute to your emergency fund, pay down your debt or fund those stretch goals you often think about. Navigate the side hustle landscape with curiosity, explore opportunities and try and give as many things a go as possible to see how you can maximise your time available to improve your Net Worth contributions and diversify from your job. Remember, it’s not just about making money, it’s about building a foundation for the future. Happy hustling!

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