The side gig economy is booming, with a quarter of side hustlers reporting they make between an extra $1,001 and $5000 per month, according to Side Hustle Nation. These additional income streams can help pay down debt, build savings or cover rising living costs. However, managing this income effectively is where many stumble. Without the right banking strategies, side gig earnings can easily get lost in the shuffle of everyday finances.
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It takes more than hustle to make side gig income work harder. Selecting the right accounts and using banking features strategically can make a big difference not just during tax season, but year-round.
Separate Business and Personal Finances
According to Jay Zigmont, PhD, CFP® and founder of Childfree Wealth®, a dedicated bank account for side gig income is essential, as this separation makes it easier to file taxes, calculate profits and identify deductible expenses.
“Anytime you do side gigs or run a small business, you should have a separate banking account,” he said. “When people combine personal and business expenses, they often lose the ability to track how they are actually doing.”
Zigmont recommended the Profit First process for tracking expenses through bank accounts; a system designed to clarify business finances and improve profitability.
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Choose the Right Account Type
Not all accounts are created equal. Business checking accounts offer features like higher transaction limits, payment processing and tax reporting tools that personal accounts may lack. Many banks now offer fee-free or low-fee options, which are critical for smaller operations.
For side businesses that accept cash, a local bank can be the most convenient option. However, if all transactions are online, Zigmont recommended looking into options like Mercury, Relay or Amex Business Checking for features and facilities tailored to digital businesses.
It’s also worth looking for bonus offers. “I recently took advantage of a $300 bonus for opening a business bank account at my local Chase,” said Zigmont. Bonuses like these can add value, especially when starting out.
Automate Savings for Taxes and Expenses
Taxes are a reality for anyone earning side gig income, yet many overlook this responsibility. According to Finder’s Consumer Confidence Index, 28% of American adults admit they haven’t reported income from a side hustle on their tax returns. This can lead to serious consequences. In 2024, the IRS investigated 1,373 cases of tax crimes, with 615 defendants sentenced.
Setting up automatic transfers to a dedicated savings account for taxes ensures there’s money available when quarterly payments are due. Some business accounts even allow the creation of sub-accounts, making it easier to allocate funds for different areas of your business — including taxes.
Explore Banking Features That Add Value
Banks often offer tools to streamline financial management. Look for accounts that include features like invoicing software, ATM fee refunds or promo deals on other business tools. These can reduce the time spent managing finances and help identify opportunities for savings.
Watch Out for Hidden Fees
Many accounts designed for businesses come with fees for maintenance, transactions or depositing cash. Research options that fit the nature of the gig, as, let’s face it, the less expenses a side gig has, the better. For example, freelancers paid through apps may benefit from accounts that waive incoming wire transfer fees, while local service providers might prioritize free cash deposits.
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This article originally appeared on GOBankingRates.com: 5 Banking Tips To Maximize Side Gig Income
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