Are you trying to figure out what to do with your side hustle money?
That’s a good problem to have.
Whether you’re making a couple hundred bucks, or a few thousand dollars each month from your side gig, there are all sorts of ways you can use that extra income.
But before you take that cash and go on a spending spree, here are a few of the best things you can do with side hustle money:
1. Invest A Portion Back Into Your Side Hustle
Depending on your side hustle, one of the best things you can do is reinvest some of your earnings back into your business. This will help you grow your business and potentially make even more money down the road.
For example, if you’re a blogger, you could put some money into paid advertising or better hosting for your website.
If you’re a freelance writer, you could use the money to build a website that showcases your work and gives customers a more professional way to connect with you.
If you run a service-based side hustle, you could put some of the money into local advertising, like billboards and online ads, to attract more customers.
Regardless of your side hustle, reinvesting some of your money can help you bring in even more income down the road.
How much money should you reinvest in your side hustle?
As a good rule of thumb, you should reinvest 20-40% of your side hustle income into your business. No matter what percentage you choose, you should focus your reinvestments on increasing sales, boosting efficiency, and improving the quality of your products or services.
2. Invest In Yourself
Another great option for what to do with your side hustle money is to invest in yourself.
For instance, you could take a class or course that helps you improve your skills.
Or, you could hire a business coach to help you make better decisions, stay accountable, and fast-track your side hustle success.
You could also use the money to attend conferences or networking events related to your side hustle. These types of events can help you make connections, learn new things, and find inspiration for growing your business.
Put simply, when you invest in yourself, you’re investing in your ability to earn more income.
3. Use It To Pay Off Debt
One of the wisest things you can do with your side hustle money is to use it to pay off debt. Whether you use it to pay off a credit card balance, car loan, or your mortgage, the less debt you have, the more financial freedom you’ll experience.
Also, the quicker you pay off your debt, the less money you’ll spend on interest.
If you’re unsure where to start, we recommend using the debt snowball method. With this method, you focus on paying off your smallest debt balances first.
Once you’ve paid off your smaller debts, you can use the money you were using to make those payments to tackle your larger debts. The goal is to “snowball” your debt payments until all of your debts are gone.
The debt snowball allows you to experience some quick wins early on and, thus, maintain a higher level of motivation through your debt payoff journey.
4. Add It To Your Emergency Fund
Another great thing to do with your side hustle income is to put it toward an emergency fund.
An emergency fund is essentially just a savings account that you use to cover unexpected “emergency” expenses, like an unforseen car repair or medical bill.
Ideally, your emergency fund should hold enough money to cover your living expenses for 3-6 months.
An emergency fund gives you peace of mind knowing that you have a cushion to fall back on if something unexpected arises.
If you’re unsure what to do with your side hustle money, giving a portion of your income away is another fantastic thing to do.
Whether you give to your church, a charity you support, or just a friend in need of a little help, giving is one of the best things you can do with your money.
Beyond that, consistently giving helps you maintain a healthier relationship with money.
If you want to use your side hustle to positively impact the people around you, consider giving a portion of your income to an organization you support or a person in need.
6. Invest In A Roth IRA
Investing in a Roth IRA is a great option if you’re looking for a long-term way to grow your money.
A Roth IRA is a retirement account that allows you to contribute after-tax dollars (money you’ve already paid taxes on).
Once the money is in your Roth IRA, it will grow tax-free. As pretty much every financial advisor will tell you, this is one of the most effective and smartest ways to invest your income.
There are a few restrictions on how much money you can contribute to a Roth IRA each year, but if you qualify, it’s definitely something to consider.
For most people, the best way to invest in a Roth IRA is through a brokerage account. This will give you the ability to choose from a wide range of investment options, including stocks, mutual funds,
If you’re interested in opening a Roth IRA, you have a few options:
Work With A Financial Advisor
If you’re unsure what you’re doing, we highly recommend hiring a financial professional to help you set up your Roth IRA.
Not only will they be able to help you make wise, educated decisions, but they can also help you create a clear plan to help you achieve your long-term financial goals.
If you’re interested in working with a financial advisor, here are a few of the most reputable companies you can work with:
Use A Robo-Advisor
If you’re not interested in working with a human financial advisor, you can opt for a robo-advisor to help you set up and manage your Roth IRA.
Robo-advisors are essentially online investing platforms that automatically invest your money for you based on your goals and risk tolerance.
Not only are they typically much cheaper than working with a human advisor, but they’re also a lot more convenient.
Both companies offer low-cost, automated investment accounts that are great for people looking for a more hands-off retirement investing option.
Open A Self-Directed Roth IRA
If you know what you’re doing, and like to have complete control over all of your investments, then you might want to consider opening a self-directed Roth IRA.
A self-directed Roth IRA is essentially a DIY version of a Roth IRA.
You’ll be in charge of all the investment decisions and will need to set up and manage the account yourself.
This option isn’t for everyone, but it can be a great choice if you’re comfortable managing your own investments.
If you want to set up a self-directed Roth IRA, we recommend opening a personal brokerage account through a platform like Ally Invest or TD Ameritrade.
With these platforms, you’ll be able to choose from a wide range of investment options and access plenty of research tools and education.
Last but not least, don’t forget to enjoy some of your side hustle earnings!
You’ve worked hard for your money, and you don’t have to feel guilty spending a portion of it on things and experiences that bring you joy.
Whether that means taking a well-deserved vacation, playing a few extra rounds of golf each month, or finally buying that pair of shoes you’ve been wanting, it’s ok to spend some money on fun.
Assuming you keep it within reason, having a little fun will help you stay motivated and remember why you’re working so hard.
Save For Future Purchases
In addition to investing, saving, and enjoying your side hustle income, you can also set some aside for future purchases.
Whether for personal or business purposes, the sooner you start saving for large expenses, the better.
For instance, if you know you’re going to need a new laptop for your business sometime within the next year, you could start stashing a little money away.
Or, if you really want to take your family on a Hawaiian vacation, you could use your side hustle to save up for airfare and hotel expenses.
If you can get into the habit of automatically transferring a portion of your side hustle income into savings each month, you’ll be in good shape when it comes time to make these types of purchases.
Hopefully, this article has given you some better ideas on what to do with side hustle money.
Remember, there’s not a single right answer. What you do with your money should be based on your individual goals and needs.
So take some time to think about what’s most important to you, and then make a plan to put your side hustle earnings to work.