Money Moves to Make (and Questions to Answer) Before Taking Your Side Hustle Full-Time

Money Moves to Make (and Questions to Answer) Before Taking Your Side Hustle Full-Time

You’ve been working on your side hustle for a while now to generate some extra money on the side. It’s always been something fun and enjoyable — and you’ve gotten really good at it.

So good, in fact, for the last 3 months you’ve made more than you make at your day job! And you’re ready to devote yourself to this budding business full-time. Can you make the transition?

First, look back at your side hustle income. How long have you been at it, and how much have you made total? Are you making enough to pay taxes, business expenses, yourself (via retirement savings and investments), bills and living expenses, and have a little left over for discretionary spending or to reinvest in your business?

Were those last 3 months sustainable or was there a reason for a big bump in earnings? Is your income seasonal, meaning you need to plan for slow times by saving more of your income when you’re busy and making more?

These are the kinds of financial questions you need to ask yourself before you hand in your notice at work to leap into a life of self-employment.

There’s not necessarily a right and wrong answer here — but it’s important to think through these things and gather the information and details so you can make the best decision for you when determining if it’s time to go from side hustler to full-time entrepreneur or freelancer.

Here are some other questions to consider and the money moves you need to make before you make a change.

How and When Will You Pay Yourself?

It’s nice to generate an income on your own and be in control of your own salary. But that also requires discipline. Just because you made an extra $2,000 this month doesn’t mean you should transfer it to your personal checking account and enjoy a little shopping spree.

Decide how much you’ll pay yourself each month and stick to it. You can pay yourself weekly, twice a month, or once a month. Anything extra is profit in your business and can go toward investing in your work, savings, or retirement accounts.

Who’s Taking Care of Your Future?

Speaking of, when you go from side hustler with a day job to full-time entrepreneur, you don’t just lose your steady paycheck. You give up access to employer-sponsored retirement accounts too.

That doesn’t mean you’re out of luck when it comes to saving for your future. It just means you’re responsible for funding your retirement accounts on your own. Make sure you set aside a percentage of your earnings to contribute to an appropriate savings vehicle, like a traditional, Roth, or SEP IRA or a Solo 401(k).

Do You Know How to Budget on Variable Income?

Most people who freelance or own their own business don’t make the exact same amount month after month. Not only does your income rise and fall each month, but your expenses might too.

Before you strike out on your own, make sure you can budget on a variable income.

That means knowing the difference between your truly necessary, non-negotiable expenses (like your rent or mortgage, utilities, and groceries) and expenses that you usually pay every month and make your life a little better, but aren’t essential to your wellbeing and survival (everything else).

You also need to be prepared to cut back on anything that’s a want or a discretionary purchase if you experience a month where you make less than usual.

Do You Have an Emergency Fund?

Regardless of the type of work you do, you need a cash reserve set aside to help cover emergencies and unexpected expenses. The general rule of thumb says to put 3 to 6 months’ worth of expenses into an account you can easily access should you need cash immediately.

But when you want to go from side hustle to full-time self-employment, you take on more risk because you leave a steady paycheck behind. That can make your cash flow more volatile, increasing your chance of getting stuck with a hefty bill in a slow period where you made less than expected.

Before you go out on your own, make sure you have at least 6 months’ worth of expenses stashed away in your emergency fund. You may also want to build a cash cushion in your business checking account, since you may experience not just personal emergencies but professional ones, too.

Do You Want to Buy a House in the Next Few Years?

Plenty of people take a side hustle full-time because it’s more lucrative than their day job. They have big goals to hit, like buying a house. But unfortunately, going into full-time self-employment in order to do something like that can backfire.

That’s because mortgage lenders require 2 years’ worth of tax returns as proof of your self-employment income in most cases. Even if you have more in the bank thanks to your side hustle turned full-time business, you may not get approved for a loan until you have those tax returns showing your official self-employment income.

Think through your goals and consider how switching from employment to self-employment may impact your ability to reach them — whether it’s through a technical issue like needing to build a history of tax returns showing self-employment income or through practical ones like the possibility of a cash flow that fluctuates from month to month.

Are You Prepared to Pay Taxes?

Taxes get more complicated when you work for yourself full-time and no longer make any kind of W2 income.

You may need to pay more than you did when you were an employee making 1099-MISC income on the side. And depending on your situation, changing your filing status (from a sole proprietor to an S-corp, for example) may make sense.

Before you head off on your own, make sure you have a good CPA lined up who can help educate you about your business taxes.

What’s Next for Your Financial Plan?

On a similar note, plan to speak with a fee-only financial advisor who understands the ins and outs of self-employment before you make the leap.

Changing up your career path can lead to changes in your financial situation. Talking through the possibilities now will help you leverage your resources and capitalize on any opportunities that might come your way.

It’s all about being proactive to put yourself in the best position possible to enjoy success — both in your new full-time venture and your financial life.

Episode 12: Ask Mary Beth: Am I Sitting on Too Much Cash and How Do I Know How Much Mortgage I Can Afford?

Episode 12: Ask Mary Beth: Am I Sitting on Too Much Cash and How Do I Know How Much Mortgage I Can Afford?

Ask Mary Beth
Ask Mary Beth
Episode 12: Ask Mary Beth: Am I Sitting on Too Much Cash and How Do I Know How Much Mortgage I Can Afford?



One of the fun parts of being a financial planner is getting to field and answer questions from clients and readers all around the country. In these Work Your Wealth episodes I’ll be taking time to address and answer questions I’ve come across from readers and clients throughout my career. Today I’m answering the above questions.


  • What amount is just enough cash to have on hand.
  • Where to keep your cash savings accounts.
  • How to determine what to do with additional cash beyond your emergency fund.
  • Planning for short versus long-term goals.
  • The lifestyle factors to consider before locking in a mortgage payment for the next 15 – 30 years.
  • Decisions to make before shopping for a house.
  • The #1 thing you need to get organized prior to planning a home purchase.




How to Take Your Side Hustle to Full-Time

How to Take Your Side Hustle to Full-Time

We all have hobbies. Whether it’s art, making craft beer, baking, web design, or crocheting, it is important to have passions beyond the day-to-day slog of a career. Not only does it keep us sane, but it makes us more interesting as well. So what happens if you’re really good at your hobby? I mean, what if you’re really, really good? In fact you’re so good that you’ve turned that hobby into a side business that’s bringing in some extra cash. And now that the money is streaming in, you’re actually considering the possibility that this could become a full-time thing. This could be your thing! Your business! But what steps do you take? How do you even start the process? How do you turn a side hustle into a full time gig?

Start Moonlighting Now

Before you start writing your resignation letter, take at least a few months to build up your side hustle while you’re still employed. The longer you spend working on the side, the more prepared you’ll be to make the switch to full time. Plus, if you have several months (or even a year) under your belt, you’ll have a better idea of how the market cycle works in your industry – and how to prepare for it. You should also make as many contacts as you can before you quit your day job. Having a strong interpersonal network will help you find new work, open you up to practical advice and let you know when you’re ready to join the full time ranks. You can find contacts online, at your local Chamber of Commerce or at a conference in your field.

Set up an Emergency Fund

No matter when you quit or what kind of side hustle you have, it’s important to set up a lifestyle emergency fund before you leave your full-time gig. An lifestyle emergency fund will cover your bills and expenses when you don’t make enough in a certain month or a client is slow about sending payment. (NOTE: this is different from your every day emergency fund which is meant to cover unplanned for emergencies like insurance deductibles, leaky roofs, car repairs, etc.) People who are self-employed should have about six months’ to a year’s worth of expenses in a savings account. It can take time for a business to grow, and a lifestyle emergency fund will help keep you solvent while your business is expanding. Remember, this fund doesn’t need to be six month’s worth of income – just six month’s worth of expenses. These should include any regular bills you have, variable expenses such as gas and groceries and the minimum you need to keep your business running. Having a lifestyle emergency fund will keep you from scrambling when it comes time to pay your rent, or being forced to take on clients who don’t fit your ideal business model.

Make Adjustments Where Necessary

If you’re going to make the leap or get serious about considering it, evaluate where changes may be necessary. Will you need to get your own health insurance since an employer will no longer provide it? Will you continue saving for retirement? If so, where will you stash away without an employer-sponsored plan? Can you reduce your expenses in order to reduce the amount of income that’s necessary to bring in at first? Being flexible with your time and spending will pay off in ramping up your side hustle and your full-time business. Put structure in place when needed, but don’t be afraid to make alterations when things are veering off course.

Talk to Others in the Field

It’s easy to imagine what a career looks like before you actually try it. Some jobs that seem perfect for you may end up being your worst nightmare. That’s why it’s important to do your research and figure out what your future full-time gig actually looks like. Talk to people in your field who you admire and ask them what their job is really like. Is it as glamorous or simple as it seems? Do they have a good work-life balance? What is it like being your own boss? You should also try joining some forums or groups where your full-time heroes hang out. That way you’ll see an unfiltered look into their lifestyle and what day-to-day life looks like for them. The common theme for most of this advice is preparation. As important as it can be to jump into new challenges head first, you also want to make sure you’re not diving into a pool that’s two feet deep. Do your research, get your ducks in a row and create an environment that you can succeed in – then do it.

Are Your Finances as Bad as You Think?

Are Your Finances as Bad as You Think?

When meeting with prospects for an initial consultation and with clients for their first meeting, I tend to get the question of “how do we compare to your other clients?” Most people have an image in mind of where they think they stand with their finances. It’s either bad, reallllyy bad, okay, good or great. Ultimately though, it’s hard to have a sense of confidence about where you stand without first doing the work to figure out, well… where you are standing. I wish I could tell you that it won’t be as bad as you think or it will be as great as you imagine, but honestly, we won’t know until you take the time to evaluate where you stand and figure out what kind of moves you need to make to get to (or stay) where you need to be. If you’re looking to take stock and see which boxes you have “checked off,” here are some important, self-evaluating questions to ask yourself to assess the current state of your finances:

  • Do you have a fully funded emergency fund?

If you’re a single income home, you should aim to have 6 month of “must have” expenses set aside into an easily accessible and liquid (i.e. cash / savings) account. If you’re a dual income family, you can likely get a way with 3 months, but 6 is better. Life is unpredictable and unexpected things happen all the time. It’s not a question of if things will happen, but a question of when and your finances will be in a much better state if you have the cash set aside to handle those unplanned moments than if you need to rely on credit cards and dig yourself into debt.

  • Is your credit score in the “excellent” range?

Aim for a credit score to be 720 or higher. Your credit score is your financial report card, except there’s no getting rid of it after college. This number will save or cost you money over your life. The higher your score, the lower the interest rates you receive and the more money you save when it comes to taking out a mortgage or car loan. Your credit score simply indicates your creditworthiness and tells a lender how reliable and timely you will be in repaying a loan. Having a strong credit score is invaluable to always provide you the best financing options. Related article: What Millennials Need to Know about Their Credit Scores

  • Are you saving at least 10% for retirement?

If you’re in your 20s, you should aim to save 10% of your income for retirement. If you’re in your 30s, aim for 15%. The earlier you start saving, the better and when it comes to determining how much you should save, it’s important to think through the future you want. Take the time to consider what it is you would love to do in retirement and when you think you’d want to retire.

  • Are you able to meet everyday expenses?

If you’re relying on credit cards and debt to get by, chances are it’s time for a financial change. Often times the reason people feel like they’re living paycheck to paycheck isn’t because they don’t have enough money. It’s that they aren’t wisely spending the money they do have. When this is the case, it can be a fairly straight forward exercise to get your cash flow in order so that you can meet everyday expenses with ease. It’s important to first understand your current spending habits by tracking your spending. Once you know where your money is going, you can determine which expenses you can eliminate altogether and other spending habits that could be altered to more easily cover your fixed expenses and align the rest of your money in the areas you care about the most. (Note, if getting out of debt is necessary – I recommend freeing up money to go towards a debt pay down plan).

  • Do you feel well compensated for your job?

Remember that when it comes to compensation, it doesn’t have to only be about the salary. You can also consider benefits, bonus structure, employee stock options, flexible vacation policies and work from home arrangements. If the income and benefits you earn for the work you do doesn’t feel good, it might be time for a change. Don’t be unwilling to negotiate a pay raise, especially after successfully completing an important project. If you’re working hard and doing great work, ask to be compensated for that. If your current employer isn’t able or willing to pay you what you’d like, are you ready to consider a move to another company or start a side hustle? Forbes reports that employees who stay in companies longer than two years get paid 50% less. If you don’t feel well compensated right now, know that you have options if you’re willing to take action.

  • Is your net worth growing?

 Your net worth is your total financial worth – measured in dollars and is something I consider a measure of your financial health. After you take all your assets and subtract all your liabilities, what you’re left with is your total net worth. As the years progress, what you want to see happen is that your assets grow and your liabilities decrease. Start with where you are today – know your number – and keep track every 6-12 months to see if your assets are, in fact, increasing over time. If your net worth is stagnant or in decline, you’ll want to know what is causing the lack of growth so that you can tackle any issues getting in the way of your financial health.

  • Do you have a debt pay down plan in place?

If you have debt, you’ll definitely want to have a pay down plan in place. There are many ways to get out of debt, but the two most effective ways are the debt snowball and the debt avalanche. Both plans involve aggressively paying down one balance while making the minimum payments on the rest. The difference lies in what order you tackle the debts. With the debt snowball method, you pay off your debt from the smallest to the largest balance so that you establish good habits and roll more and more money into the next debt. With the debt avalanche method, you pay debts down from the highest interest rate to the lowest interest rate so that you pay as little in interest as you can and roll that savings into the next debt. The most important thing is to have a plan in place on how YOU are going to pay down your debt and stick to it.

  • Are your taxes under control – did you owe or receive a refund?

Ideally, you want to break even at tax time, otherwise you’re giving an interest free loan to the government if you get a refund (or you feel kind of annoyed if you owe). Zero is the goal! If you owed a lot for taxes or you received a sizeable tax refund, something went awry this year. The way to make sure you don’t owe again next year is to understand your tax liability and adjust your withholdings accordingly. Perhaps reach out to your human resources department to update your W-4 or adjust your quarterly payments if you’re self-employed and business is growing.

  • Do you have the right kinds of insurance in place?

Insurance is a tricky topic, but at a minimum you should ensure you have some sort of health insurance and disability insurance in place. In addition, you’ll need life insurance if there are others who are dependent on your income. Property and casualty insurance (such as auto, home, umbrella and renters insurance) are also important to have in place. Always work with your broker or agent to confirm you have the appropriate level of coverage needed for your situation. Don’t just guess at it!

  • Are your investments appropriately diversified?

If you’re saving for retirement and your investments are sitting in cash, chances are the answer to this question is “no.” Your investments should be allocated based upon the time frame until you’re needing the funds. There’s debate between when to invest or not invest for short to mid-term goals, but if you need the funds in less than 5 years, a CD is going to be your safest bet. If you’re investing for the long run, ensure you have a mix of equities and fixed income, small and large firms and domestic and international. Leverage mutual funds and exchange-traded funds, which will help you to diversify when starting out with smaller sums of money. How many of the above did you answer “yes” to? If you’re 10 for 10, then chances are you’re on a solid financial track! If there are any questions that left you wondering or thinking you might need a change, there’s no better time than now to make some adjustments. The best thing you can do is be aware of how you’re doing and keep track of your financial health year after year.

20 Smart Choices to Make With Your Tax Refund

20 Smart Choices to Make With Your Tax Refund

If you’re someone who receives a tax refund, the sudden surge in cash, no matter how large or small, is sure to put a smile on your face. You overpaid your taxes for the year and now you have some extra money you weren’t necessarily expecting. So, what do you do with your tax refund? Here is a list of 20 smart money moves you can make with your tax refund:

1.     Start or add to your emergency fund It’s always a good idea to have rainy day money for the ‘just in case’ moments in life.

2.     Put it towards something you’ve been saving for Maybe you’ve been saving for a large purchase like a car or new technology. Your tax refund may not cover all of it, but it can certainly help you save up for that big-ticket item a little faster.

3.     Pay down a debt If you have credit card debt, this is exactly where your tax refund should go. Get rid of those high interest payments first!

4.     Make a home improvement Home improvements can increase the value of your home and your level of enjoyment in your home. You can definitely use a tax refund to tackle that landscaping project, put in those French doors or put it towards any home improvement project you’ve been dying to get to.

5.     Give it away to a charity Giving money away to your church or a cause you believe in is a wonderful way to use your tax refund and may become a tax write off on next year’s return.

6.     Invest it in your business Own a business? This extra surge in cash can be put towards new equipment, software, inventory or something else that can make your business run more efficiently and be more profitable.

7.     Buy something you want (within reason) Although not the most financially savvy option, it’s ok to splurge on yourself every once in a while when you’ve been working hard to save and tackle debt.

8.     Make an extra mortgage payment Making extra mortgage payments help you pay down the principal amount of your loan faster, reducing the length of your loan and interest payments.

9.     Have an experience Buy an experience with your tax refund instead of an item. Experiences create memories that have much stronger lasting gratification than a shiny new toy.

10.  Buy someone a gift If you’re the generous type, show someone you care about them by buying them a gift just because.

11.  Invest in yourself Prioritize your own personal and professional development by investing in your growth.

12.  Open a Roth IRA If you haven’t opened a Roth IRA yet, you can use your tax refund to open one now. I like how these retirement accounts work and recommend them even if you already have a 401(k).

13.  Save it for your child’s education Open or make a contribution to a 529 plan that specifically allows you to set money aside for education purposes.

14.  Pay it forward Next time you’re at Starbucks, pay for the guy or gal in line behind you. Spreading goodwill and good cheer is an excellent use of money any time of the year.

15.  Host friends and family Invite everyone over to your place and host a get together! Fun times all around and you won’t worry about dipping into your regular grocery budget this month.

16.  Update your wardrobe Use a portion of the money to add one or two staple pieces to your wardrobe.

17.  Re-energize your health Join yoga, Pilates or a gym. Try purchasing a couple of workout DVDs or spending a few extra dollars on healthier items at the grocery store. A healthier you could translate into reduced costs for medical expenses over the long term.

18.  Visit friends or family Not everyone lives close to their friends and family. Maybe you can take that trip upstate or buy a plane ticket cross country to spend some good quality time together.

19.  Be extra generous Give your mailman or garbage man a tip, leave a little extra for the waiter, buy an extra box of Girl Scout Cookies!

20.  Do a little bit of everything Typically, I recommend a 50 / 30 / 20 allocation: 50% towards debt, 30% towards savings and 20% towards a splurge on yourself. This gives you the best of all worlds and ensures you’re putting the money to good use! What are you planning on spending your tax refund on this year? Tweet me @marybstorj!