As Financial Awareness Month draws to a close, Michael LaMaich sits down with Cody to delve into a topic that’s gaining traction: side hustles. The trend of taking on additional sources of income, whether it’s dog-walking or food delivery, has been steadily growing. A recent study reveals that nearly 40% of Americans are embracing side hustles to supplement their primary jobs.

To shed light on this phenomenon, we turn to local financial professional Mike LeMaich from Global Fund Management. Mike joins us to discuss strategies for maximizing earnings and the crucial factors to consider before embarking on a second job.

Why is the Trend of Side Hustles on the Rise?

Mike LaMaich: The concept of a side hustle has evolved from a creative outlet into a financial necessity for many. Approximately one-third of individuals with side hustles rely on the extra income to cover daily living expenses. The ongoing inflation, with a 3.2% increase since last year, has put financial strain on households. Side hustles have also become a means of generating additional funds for spending, savings, and debt repayment.

What about the Tax Implications of Side Hustles?

ML: In the eyes of the IRS, side hustles often fall under the category of “gig work.” This includes income earned through digital platforms or apps, such as selling handmade items or providing ride-sharing services. If your gig work yields $400 or more, whether it’s part-time, temporary, or a side gig, filing a tax return is mandatory. All earnings from gig work are considered taxable income. Additionally, next year will bring new regulations for payment apps like Venmo and Paypal. Earnings exceeding $600 will require a 1099-K form.

How Can Side Hustlers Make the Most of Their Extra Income?

ML: Creating financial security is paramount. While the urge to spend is understandable, building an emergency savings fund covering three to six months of expenses is essential. Opt for a high-yield savings account for flexibility and higher interest rates. Addressing debt is another wise move. Amidst soaring credit card balances, consider allocating extra funds to debt reduction, ensuring you pay more than just the minimum balance.

What About Retirees Considering a Side Hustle?

ML: For retirees seeking engagement, a side hustle can be appealing. However, there are financial aspects to weigh. If you’re receiving Social Security benefits and haven’t reached the full retirement age of 67, earning over $21,240 leads to reduced benefits, at a rate of $1 for every $2 earned. Balancing extra income with potential tax implications is crucial. The combination of income sources, including retirement accounts and Social Security, can influence tax brackets.

Mike’s advice resonates with those exploring the realm of side hustles. Whether it’s making ends meet, reducing debt, or planning for retirement, a side hustle can be a game-changer. As financial awareness extends beyond the month, Mike’s insights guide individuals toward informed decisions about their financial well-being.