Rethinking The Way I Allocate Side Hustle Income

When I first started writing this blog, a little less than a year ago, I was really concerned about two things: finishing my debt payoff, and starting to save for retirement. At 35, I felt there was really no time to waste; I’d already missed out on all the big gains of the post-crash years, too, so I couldn’t expect the market to necessarily be much help. (Mind you, it’s helped some; at this exact moment, I’m showing a $750 gain above what I’ve invested.) Recently, however, I’ve realized I need to make a change to my financial plan.

Last spring, I decided to allocate all extra income — interest, side hustle payments, gifts, the works — to my Roth IRA. I seeded it with $2500 from my savings account, reducing that to pretty much nothing, and then have added about $3000 since then from those various sources, including the majority of my 2014 tax refund just now. I’m really glad I’ve done that.

However, I’m getting a point where several wants are turning into needs, or potentially will be. I’ve gone on about my wardrobe situation ad nauseum; I can put that off for a few months longer, but this summer I absolutely must do something about it. Meanwhile, my computer is getting really cranky. I’ve repaired the hard disk a couple of times recently and that’s helped, but it’s still slow, overheats quickly, and I get a spinning beach ball more often than I feel like I should. I really, really, really, really, really hope it doesn’t totally die until at least another year’s gone by, but I definitely need to start planning for its eventual replacement.

Plus, I would just kind of like to ease up a little with regards to spending. I’ve been rather guarded about “fun” money the last year or so; I’ve spent on traveling, but when I’ve been home, I’ve been reluctant to go out and do anything involving $$ and as spring and summer come on, I’d like that to be able to change a little.

And I feel like I’ve gotten the Roth off to a good start. I do want to keep adding to it, don’t get me wrong. But at least for now, I think I’m going to let it sit, and let myself use my side hustle income for handling life now, and not thirty years from now. I should have at least $55 coming in during the first week of March for work I’ve already done, so I’m starting by using that to beef the gremlins fund back up, after spending so much from that category in February in order to fund my car repair. I was able to redirect a little more money from other places during February itself, too, so my March gremlins budget now shows $265 — only $35 shy of where it would have been if I hadn’t had to draw on it for the car in February. It’s a priority of mine to grow that fund to the point where it can really act as a robust emergency fund by itself, so that I can leave my real e-fund alone as much as possible. I think that’s the kind of thing I’m going to do with any side income for the foreseeable future; I don’t plan to blow it on buying ice cream, but instead use it to enhance some of my sinking funds for things like gremlins, clothing, and computer savings.

What do you guys do with your side (non-paycheck) income?

36 thoughts on “Rethinking The Way I Allocate Side Hustle Income

  1. Now that I work from home, I don’t really have “side income” anymore. When I did, it did feel a little bit like free money. I think it’s smart to allocate it for stuff you wouldn’t buy otherwise! It’s your money and you earned it!

    1. thesingledollar says:

      Yeah, once you go freelance none of it is really side income 🙂 I kind of like having the paycheck-side income structure for exactly this reason — I get to allocate whatever comes in on the side as I please, with my regular paychecks funding most things.

  2. Cindy says:

    I think it’s really easy when you start getting your financial life together to swing to the extreme. I’m definitely feeling a bit pinched now that I’m in serious debt payoff mode. I’ll probably continue this way for as long as possible, hopefully until I’m debt free. But I’ve already considered how I’ll find more balance after that, between the present and the future. You seem to be in a good place to be looking at easing up a little and allowing a little more for “now”. There’s nothing wrong with that!

    1. thesingledollar says:

      Yeah, I think so! I’m just trying to be “conscious” about the way I ease things up 🙂 It’s got to happen though because now that things are more on track, I’m realizing I can’t be this extreme forever.

  3. The side hustle money around here hasn’t really been figured out. I think that we’re cool with buying “business” stuff with the income, like a new computer, but all the “income” will go to the family pot. It can be hard to live on a bare bones budget for an extended period of time. I’d say take a look at your goals and your timelines then see what you have leftover and work it into your budget. Then you’ll be on track and won’t feel guilty about buying new clothes.

    1. thesingledollar says:

      Yeah, I think this is wise — I’ve been pretty strict for the last year or so and I’m at the point now where I think I can take a deep breath and ease up a *little* — but I want to make sure my long-range plan is still on track. So, more number crunching this week 🙂

  4. I think a little diversifying is always a good idea. Things always manage to pop up, and I hear ya on the computer. I have a mac (for the type of work I do) and I got that used already and I can’t even shut it down or else it has a very hard time restarting. Yikes! It’s hanging in there. Right now my side income IS practically my income, so I treat it like any other freelance income if that makes sense. Only when and if I go over my projected so I allocate it to something else, and right now that would be my emergency fund.

    1. thesingledollar says:

      I also have a mac, a laptop, and they are so expensive right now because they’re transitioning to all SSD drives that cost a lot more than the current hard drives do. That’s the other reason I want to wait; right now, to get everything I need I’d be paying about $2000 for a macbook pro! That’s crazy and I hope if I wait a year or two the cost of those hard drives will keep dropping. I’d be a lot more comfortable with something in the vicinity of $1000.

  5. Elroy says:

    I have $0 “side hustle,” but if I did it would be going into a SEP-IRA.

    1. thesingledollar says:

      Yeah, that’s always a good choice!

  6. Chonce says:

    I use side income to pay off debt, get ahead on my bills and expenses or set aside in a slush fund for non-life threatening expenses like some of the ones you mentioned above. Since you don’t have debt anymore, I think it’s great that you established a gremlins fund (love that name!) to cover other pesky expenses that need to get taken care of sooner or later.

    1. thesingledollar says:

      I would totally use it to pay off debt if I still had that — that’s also a great choice. I love the gremlins too. Well, not the gremlins themselves, but the name 🙂

  7. That’s a great question. The hubs & I are pretty different in our ideas about what to do with side income. I would love to pay down our loans as quickly as possible, while he thinks at least part of it should be used for fun spending. We also go back and forth about how much we should put towards savings, and what our long term goals for that are. If you have the flexibility to spend a little more and those things will enhance your life, I say go for it. The last thing I want to do is to be so burdened by money (not just debt) that I forget to enjoy myself, you know?

    1. thesingledollar says:

      I do know! I am ready to stop worrying quite so much about money; I feel a little more stable in my career and that makes me feel like I might have income for a while instead of just another nine months or what have you. 🙂

  8. Might as well start setting aside some $$$ for the computer replacement…that is going to be an expensive need. We have funds for things, most recently our tax bill, and even if the bill comes without being fully funded – the financial blow is softened.

    1. thesingledollar says:

      Yeah, I really need to start doing that. I’m going to start with just $20 a month in the computer fund, and after I finish my emergency fund in August I can get to work harder on that. You’re right that even if I don’t save up enough before I need to replace it, at least it’s something.

  9. ARBM says:

    I have zero side income (maybe someday, but not yet), so I cannot really comment… However, I totally think you are doing the right thing. You did an amazing job paying off your debt, and living frugally while doing that. Now that you are past that, I definitely agree that you need to invest some in your “now” life. I read a blog a while back (that I cannot find now…urg) about living in the present and being in the moment. It obviously doesn’t totally apply for finances, but it is a part of it, right?

    1. thesingledollar says:

      It is a part of it! I want to be able to do stuff like go to concerts when I feel like it (within reason). I feel like it would be a good idea to chill out some on spending at this stage.

      1. ARBM says:

        For sure! You should enjoy yourself, within reason, of course!

  10. DebtFreeJD says:

    So glad to hear! Here is my personal feeling about money: it’s a tool to improve your life. You don’t want to spend it all now and have none to enjoy later, but you also don’t want to defer all your enjoyment until later either. As long as you’re not wasting money on things that aren’t making things more fun either now OR later (and gosh, people — including myself — do a lot of both) it’s all within what one of my professors called “the realm of reason.”

    1. thesingledollar says:

      “The realm of reason”! I like that. I think that in my adult life I’ve mostly spent it all with none to enjoy later, and now the last year I’ve been trying to cram in 14 years worth of savings to enjoy later, and obviously I have to find some kind of good middle ground 🙂

  11. Alicia says:

    I think side income is an excellent way to get some breathing room in a budget, when the side income is small. When it gets larger, and if that mentality sticks you could be parting with a lot of money “because it’s beer money”. But I’m down for a balanced life in the present and the future.

    My side income in the past has generally gone yo debt repayment and building up savings. But I don’t have any now, unless you call my make-shift rental 🙂

    1. thesingledollar says:

      It’s really small! Like $50-100 a month. I agree that if it got up to the $1000s (I wish) I should rethink it again…actually I think I can guarantee I’m always rethinking 🙂

  12. Jessica says:

    Since I’m working to pay off my student loans, I use at least 50% of any side income to pay down my debt. The other 50%, I allocate towards other things like saving for big ticket items or even free spending money. So, with that being said, I think it’s completely reasonable for you to allocate your side income to save for some of the things you need and to enjoy life at the same time.

    1. thesingledollar says:

      Yeah, if I were still in debt it’d be a totally different story! This is part of my ongoing effort to figure out how to handle my money in this new phase of life….

  13. We’re in an adjustment phase too. It has been all about paying off the debt – but our van is 16 years old, and we know it’s going to breathe its last some day. And our frugal decision not to replace our old furniture is slowly becoming rather depressing. We’re saving $200 per month for an eventual van replacement (over $1000 now), and we might allow ourselves to buy furniture once the business debt is paid off. Always competing priorities and balances to strike. I was hoping for cruise control. I hope you feel satisfied with your new budget and that it serves its purpose before it becomes your old budget.

    1. thesingledollar says:

      I know about hoping for cruise control! Pretty sure I’m never gonna get there…. That’s ok though, rethinking is fine 🙂

  14. Amy says:

    I agree with a previous comment, which said that it’s easy to go to the extreme when working toward a payoff/savings goal. I’m a big believer in creating balance, because it’s hard to maintain the extreme for a long time. (I’m definitely not a Dave Ramsey gazelle.) I admire people who can maintain the single-minded intensity for a long time, but I need a little balance.

    1. thesingledollar says:

      Yeah, I’ve been doing single-minded for most of a year now…time to let up just a bit 🙂

  15. I’ll tell you when I start earning side income money. I can theorize what I might avoid (i.e., no combination of blow and/or hookers) but I’m not actually sure what I’d do. Let’s pretend it’s something reasonably responsible.

    1. thesingledollar says:

      no combination of blow and/or hookers

      Oh, come ON, man, live a little! YOLO!

  16. All my extra money currently goes to debt, but like you, we’ve got a couple of expenses that may not be put off for much longer. Hubs’ need for a new computer is like an 8.5 on a scale of 10 right now. We also have a ton of things we’ve been putting off “until we move.” That list is long and a little scary because I have a feeling we will get sucked into “We just spend hundreds of thousands of dollars, what’s an extra $$$ for a better couch, TV, bed etc.” It’s going to be the death of me. Must save all the money to pay for it!

    One thing you could do for now is bank all your extra money so you have the funds when you computer dies. If there is extra, you can throw it on your Roth. Then just cash-flow the clothes. OR you could give yourself a fun budget, $20 or whatever per month. Then anything hustled above that can go to the computer.

    1. thesingledollar says:

      Yeah, that sounds like a good idea — banking all the extras, then using anything leftover when I actually buy the computer…. Sensible. And I agree with you that for some reason when you’ve just spent a TON of money, it feels like, hey, what’s a few extra ten thousand? 🙂 I guess the way to combat that is to pay cash for everything *but* the house itself, but sigh.

  17. When I was paying off my student loan debt all of my “side hustle” money went to the debt. Now that I’m debt-free (except the mortgage), I try to save half and spend half on stuff I want. These days I’m not making as much in side hustle as I used to, so I let myself spend more from the side hustle because I’m saving more from my full-time income.

    1. thesingledollar says:

      Changing that balance as our income changes does seem really important to me! It’s so nice to be a “survivor” rather than a “payer” of debt, isn’t it?

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