Today, at 39, I have seven income streams, including affiliate marketing, blog and podcast ads, speaking engagements, digital courses, AirBnB rental income and brand partnerships. Combined, they bring in an average of $37,394 a month in revenue. Of that, $9,300 is in passive income.
Building a sustainable business takes time. I didn’t officially leave my 9-to-5 until 2021. So don’t put unnecessary pressure on yourself to create a six-figure business in two weeks. That’s not realistic, despite what social media may tell you.
Make a plan to grow and scale your business by identifying what improvements you need to make to take things to the next level. Here is what I always tell people before they take the plunge to run their side hustle full-time.
DON’T MISS: The ultimate guide to earning passive income online
As you grow your business, it’s so important to know your numbers.
I used to use basic spreadsheets to reconcile my side hustle income and expenses, and I usually only did this at year’s end, so I had little idea what was happening throughout the year.
When I made the decision to grow my side hustle into a full-time business in 2020, I invested in accounting software that allowed me to track my income on a daily basis. Having this information at my fingertips helped me stay in touch with my progress. I’m a big fan of using tracking software like QuickBooks, Wave, or Xero to record your expenses.
Once you start doing it regularly, you can cut out unnecessary expenses in real time.
Setting up your business finances involves several important steps to ensure that you can effectively manage your income, expenses and overall financial health. Here’s a guide to help you get started:
1. Separate personal and business finances
Establish separate bank accounts for your business to keep your money separate. This distinction is crucial for accurate bookkeeping and tax purposes.
2. Choose an accounting method
Decide whether you’ll use cash or accrual accounting. Cash accounting records transactions when money actually changes hands, while accrual accounting records them when they occur, regardless of when payment is received. Consult with an accountant to determine which method is suitable for your business.
3. Create a bookkeeping system
Establish a system to record and track your business transactions. This can be done using accounting software like QuickBooks or a spreadsheet program of your choice. Set up categories for income and expenses to make it easier to analyze your financial data.
Track income and expenses. Record all sources of income and track your expenses diligently. Keep receipts, invoices, and any other relevant financial documents organized. Regularly review and reconcile your financial statements to ensure accuracy.
4. Develop a budget
Create a budget that outlines your projected income and expenses. This will help you plan and make informed financial decisions. Review your budget periodically and adjust it as necessary to reflect changes in your business.
5. Manage cash flow
Cash flow management is vital for the financial health of your business. Monitor what comes in and goes out to ensure you have enough liquidity to cover expenses and maintain operations.
Consider implementing strategies such as managing receivables and payables and negotiating favorable payment terms with suppliers. And try to keep a cash reserve for emergencies.
6. Plan for taxes
Understand your tax obligations and deadlines. Consult with a professional to determine the appropriate tax structure for your business and ensure you comply with all IRS laws. Set aside funds regularly to cover your tax liabilities.
A good benchmark is to put aside 25 percent of your business revenue for tax purposes, but this figure will vary widely based on what state your business is registered in, whether you need to collect sales taxes, and whether there are state or local income taxes in your operating location.
You will thank me during tax time!
7. Monitor financial performance
Regularly review financial reports such as profit and loss statements, balance sheets, and cash flow statements. These reports will provide insights into your business’s financial performance, identify areas for improvement, and help you make informed decisions.
As you go through this process, it will be crucial to consult with accounting and legal professionals who are familiar with your specific business needs and local regulations. They can provide personalized advice tailored to your circumstances and ensure compliance with all financial and legal requirements.
Setting up a robust financial management system can save your sanity and your business.
Jannese Torres is an award-winning Latina money expert. Her mission is to educate marginalized communities on topics like entrepreneurship, investing and financial independence. She is the founder and host of the podcast “Yo Quiero Dinero” and the author of “Financially Lit!” Follow her on Instagram @yoquierodineropodcast.
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Source: 39-year-old who makes $9,300/mo in passive income: My No. 1 piece of side hustle money
