In 2020, one job just isn’t enough.
Everyone seems to have an extra source of income, whether it’s driving for Uber, selling crafts on Etsy or performing small jobs on TaskRabbit. It’s the age of the side hustle.
But unlike a traditional job, it’s a little more difficult to suss out just how successful your side gig is. You probably don’t receive a pay stub, and any expenses you incur come out of your own pocket. That’s why you need a spreadsheet – to track and analyze the financial reality of your situation.
Why You Should Track Your Side Hustle
If you don’t track your side hustle income, you’ll never have a good sense of how profitable the business is. That kind of uncertainty is exactly what you want to avoid when it comes to variable income. When you’re burning the candle at both ends, you want to make sure the effort is worth it.
When you’re tracking the success of a business, the most important metric is profit. Profit is essentially your business earnings minus your expenses. Tracking profit allows you to get a more complete picture of just how financially successful your endeavor is.
Just tracking income can be misleading.
A 2016 research study from MIT found that 30% of Uber drivers actually lose money working for the ride-share service. Most drivers in this situation probably don’t realize it, because they’re not aware of just how much costs like gas and car maintenance eat away at their bottom line. If you start paying closer attention to your side hustle, you might discover you’re making far less – or more – than you realized.
If you start paying closer attention to your side hustle, you might discover you’re making far less – or more – than you realized.
Another reason to monitor expenses is so you can deduct them on your taxes. When you work a side hustle, no one is withholding taxes for you. You have to pay them all at once when you file in April.
Deducting your expenses will mitigate your tax liability, so it’s vital to track your relevant expenses closely.
Before Ben Luthi became a full-time freelance writer, he started a spreadsheet tracking his writing clients to see how much he was making per month, when clients were paying invoices and how much work each client was assigned.
“If I notice one starting to drop off, I can reach out and ask for more work,” he said. “Or if I notice one has steadily increased my workload, I can adjust with other clients to avoid getting overwhelmed and burned out.”
Now that he’s a full-time writer, Luthi still uses the spreadsheet – and can’t imagine stopping anytime soon.
How to Track Your Side Hustle
Create a separate spreadsheet solely for your side hustle. If you have multiple sources of extra income, give each their own spreadsheet. Every month should have its own page on the spreadsheet.
You’ll want two columns: one for income and one for expenses. In the income column, list all the payouts you receive and the date they come in.
In the expenses bracket, write down all the expenses. Include gas, materials or supplies, equipment, subscriptions and anything else you can think of. If you drive as part of your side hustle, write down the mileage and multiply it by 55 cents (the current IRS standard for mileage deductions).
Below the two columns, create a formula to subtract your expenses from your income. If possible, write down how many hours you worked and divide your total profit by those hours.
Every couple weeks, go through and update the spreadsheet. At the end of the month, compare your profit to the previous month. Doing so will show if your income is growing, how your hourly rate compares and if you have more or fewer expenses.
If you can, use the same debit or credit card for all your side hustle expenses. That will make it easier to track, since you’ll only have to check one account.
If your side hustle requires you to send out invoices to clients, you can also track those in a spreadsheet. For each month, write down the invoice number, client billed, amount due and date sent. As you receive payment, write “received” next to the invoice. If more than a month goes by, ping the client again.
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Using a spreadsheet for your side hustle can have an added benefit – encouraging you to take the gig more seriously.
Remember, if a side hustle isn’t making you money, it might be a hobby and not a business.