Whether it's your only source of income or a side job alongside your regular gig, part-time jobs are a great way to make money while staying on a flexible schedule.
However, working part-time comes with some budget complications that you may not be aware of. Here are some strategies to consider if you have a part-time job.
If your part-time job involves freelance or gig economy work, you may be able to deduct the related expenses from your taxes to help reduce your overall tax burden.
For example, if you teach Pilates a few nights a week, you may be able to pull off exercise classes, workout clothes, or equipment. You can also deduct travel expenses to and from the Pilates studio.
Take time each week to go through your transactions and mark which ones are tax deductible. If you are unsure whether or not an item is deductible, consult a tax advisor who specializes in your industry. You may have to pay an advisory fee, but there is a good chance you can make more money on your taxes.
Save for Estimated Taxes
If your part-time job doesn't withhold taxes, you'll have to pay them yourself. This can be a big shock during tax times if you're not prepared. Freelancers and non-employees, such as gig economy workers, have to withhold their own taxes.
As a rule of thumb, you'll save between 20% and 30% of your untaxed income on taxes. For example, if you're completing a $ 200 freelance graphic design project, you set aside between $ 40 and $ 60 for taxes. Many freelancers and contractors keep a separate savings account just for taxes so they don't accidentally spend the money.
Handle cash carefully
If you work part-time as a waiter or bartender, you can receive a cash tip. If you want to avoid going to a bank or ATM frequently to deposit this money, you can start with the envelope budgeting method.
Here's how it works. Divide your categories into individual envelopes and put the given amount of cash in each envelope. If you don't want to have a huge wad of cash in your wallet or purse, you can plan to spend a week instead of a whole month.
If you prefer to shop with a debit or credit card, make sure to deposit the cash into your bank account regularly so you don't accidentally spend it. It is difficult to track cash transactions. So if you don't want to use the envelope method, deposit money quickly that you make.
If you only have a part-time job
Check your budget often
If you live on a part-time salary, you likely have little margin for error in your budget. The best way to avoid overruns is to monitor your spending frequently. Stop by at least once a week and see how your actual spending aligns with your projections.
If you are spending more than you have allotted, try reducing another category. If that can't be done, try to find a way to amass more hours on the job. Always leave some wiggle room in your budget to account for the overshoot.
Regular over-spending in a certain area can be a sign that you are not spending enough money in this category. If this keeps happening, you may need to revise your budget to make more space in that particular category. This can include eliminating or reducing fixed costs, such as moving to a cheaper apartment, adding an extra roommate, or canceling a subscription service.
If you have a full-time and a part-time job
to take advantage
Many companies offer benefits even if you only work part-time. These include, for example, appropriate pension contributions, school fees, health insurance, stock options and paid time off.
Talk to HR and find out how you can take advantage of these benefits. You never know what unusual perks may be included, like free gym membership or discounts for other businesses.
These benefits can actually be better than what your full-time employer offers. Compare health insurance programs carefully and see which option makes more sense. If you work part-time for a large company, you may have cheaper health insurance than your full-time job – especially if the latter is a small business or a nonprofit.
Always use an employer's 401 (k) plan when these equate to employee contributions. Employer contributions are essentially free money, and the rule of thumb is to always contribute enough to get the free game. You can have multiple 401 (k) accounts as long as you don't exceed the annual contribution limit of $ 19,500.
Have a reason to work harder
Having a part-time job in addition to a full-time job can be stressful and you will get burned out if you don't have a specific reason to work that many hours.
It is not enough to want more money. It has to be something personal and motivating, like “I'm saving so I can go on a three week trip to New Zealand next year” or “I work 60 hours a week to save up for a deposit. ”
Keep the reason in mind by having pictures of your target nearby, e.g. B. on the background of your phone, your fridge door or your bathroom mirror. This will serve as a constant reminder why you are working so many hours.
Avoid lifestyle creep
When you have a part-time and a full-time job, you may be tempted to give yourself something to relieve the stress. For example, you can order to take away instead of preparing dinner. It's okay to do this every now and then, but making it a regular habit can ruin the sense of the extra hours.
Build goodies into your budget and find inexpensive ways to relax, like hiking with a friend or hosting a game night at your home. If your part-time job is paid on a project basis, you can set aside a percentage for discretionary purchases. For example, you could choose to spend 20% of what you earn and save 80%.
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Zina Kumok (132 posts)
Zina Kumok is a freelance writer who specializes in personal finance. As a former reporter, she has covered murder trials, the Final Four, and everything in between. It has been featured in Lifehacker, DailyWorth, and Time. Read how she paid off student loans worth $ 28,000 in three years at Conscious Coins