It’s hard to believe that it wasn’t that long ago that having a single, 9-to-5 job was considered the norm. Now, as permanent, well-paying jobs become harder to find, having a side-hustle is becoming the new normal for an ever-increasing number of Canadians.
Unfortunately, while the growing sharing economy gives people the freedom to make more money and be their own boss, it also comes with its own challenges—the largest of which is a wildly fluctuating income. It can be very hard to budget and pay bills, let alone put savings away for your future, when you have an irregular cashflow. Luckily, there are ways to navigate the economic ups and downs of having a side-hustle. Here are some tips to maximize your money in the sharing economy.
Track Business Earnings and Expenses
First the bad news: the money you generate from a side-hustle is still subject to taxes and the Canadian Revenue Agency will want to know about all your sources of income. It’s best to speak with an accountant or tax professional to find out how much you’ll owe or whether you might even need to apply to get a GST/HST account number (if your extra earnings exceed $30,000 per year). Just be sure to meticulously track your earnings and put a portion away for paying your taxes so you’re not caught off guard at tax time.
Now for the good news. While the taxman will want a share of your earnings, you may also be able to deduct expenses related to your side-hustle (like gas if you’re delivering food, or home office expenses if you conduct a significant portion of your side gig business from home). Once again, unless you are tax savvy, it’s wise to consult a tax professional about what constitutes an allowable business deduction. Most importantly, make sure to keep all your side gig-related receipts. Doing so will help you track expenses and confirm the validity of your income-earning related expenses if you ever get audited.
Get the Most Out Of Your Credit Card
The right credit card can help a smart side-hustler turn business-related purchases into perks. Firstly, it’s a good idea to have a separate credit card just for your business expenses. Keeping your personal and business purchases on different credit cards makes it much easier to track cashflow and sharing-related purchases, which will be especially useful at tax time when you’re trying to deduct eligible expenses.
Some credit cards also offer generous sign-up bonuses (like extra cash back or points for a loyalty program) when applying for a new card. You can put that cash towards your business costs or redeem points for merchandise that you can then use for your side-hustle. You can also use a credit card to earn rewards on your recurring business’s expenses. For example, some credit cards give you cash back or points on things like office supplies, recurring bills, or gas (ideal for an Uber driver).
Furthermore, you’d be surprised by how many money-saving perks credit cards may have (even no-fee cards) that many cardholders aren’t aware of and sadly never use. Some credit cards have attractive extras like purchase protection (insures your item against damage or theft) and extended warranty (automatically extends warranties for up to a year). Several credit cards even offer discounts on rental cars, which can help cut costs on a business trip.
Finally, if you have a premium credit card that you use for business expenses, you may be able to write-off your yearly fee at tax time so confirm your rights with a tax professional.
Use High-Interest Savings (HISAs) Accounts to Your Advantage
Don’t underestimate the positive affect choosing the right savings account can have on your personal finances. High-interest savings accounts (HISA) are one of the best things to happen to banking in recent years. To compete with the big banks (who typically offer laughably low interest rates and high fees for savings accounts) many online-only banks offer HISAs with standard interest rates that are exponentially higher than those available at traditional banks.
Thanks to high interest rates and no fees, a HISA is an ideal place to keep your hard-won income safe and earn some solid compound interest as well—interest that can add up to hundreds of extra dollars a year. Best of all, your money remains easily within reach so you can withdraw it at any time when needed.
Make Sure You’re Properly Covered by Insurance
If your side gig involves working from home, it’s especially important to ensure you have a home or rental insurance if you’re a tenant to protect items that may be vital to your business, like your computer and cell phone. Note that, generally speaking, your personal items will only be covered under your insurance policy if they are used within your home/rental apartment or, in some cases, outside of your home (like a computer or cell phone) but only when the item in question is being used by you, the policy holder.
If you’re renting your belongings, you’re changing the item’s use in the eyes of your insurer such that it no longer falls under “personal property” and thus would not be protected by insurance. To find out exactly what your insurance policy covers, it’s crucial to speak directly to your provider. Alternatively, you may want to look into getting small business insurance to protect your business and its assets. Weigh the costs and the risks involved and choose wisely. A smaller operation can be relatively cheap, but expensive tools increase risk and your insurance rate.
Another important consideration is that if you use your car for your side-hustle, you are legally required to contact your auto insurance provider to inform them that you will be using your car more frequently and for a business purpose. It’s likely your insurance premiums will increase but you may be able to claim premiums as a deductible expense come tax time.