47: Your Side Hustle is Keeping You Broke

Could your side hustle be sabotaging your financial freedom instead of supporting it? Join me as we unravel the hidden traps that might be keeping your side gig from being the profitable venture you envisioned. 

Tune in to discover how to turn your side hustle into a true asset, avoiding the errors that could be costing you more than you realize. Don't miss this game-changing episode that could redefine your financial strategy.

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Transcript

Speaker 1: 0:01

Hey, this is Kimberly Knight with the Position Podcast, and today we are going to talk about something that we have not talked about before, so be sure to like, share and comment, because this could be a game changer for you and your economic situation. So today we're going to talk about three reasons why your side hustle is keeping you broke. Sips tea, minds business. No, I'm not going to mind my business, I'm going to tell it all. Listen, some of you have a side hustle because you are looking to improve your economic situation and, if ever we need it to be sure that we can take good care of ourselves, it is now, right now o'clock. The economic and political situation in our country has significantly changed, and that has impacted other countries and industries as well. So let's just think about this for a minute, because I want you to be able to take good care of yourself and of your family and your responsibilities, but this side hustle of yours is keeping you broke. So the first thing is that you are co-mingling funds. So co-mingling funds means that you are mixing your personal money with your business money. Now, why is that an issue? Let's talk about it. I'm so glad you asked. Let's say you have a full-time job and you bake cakes on the side as your side hustle, right? So your paycheck is deposited into your bank account Fabulous right, and you're paying bills. You bought your friend a cup of coffee, you just gave your daughter a birthday party from that account and also you baked 10 cupcakes and sold 10 cupcakes, and you put that money into that account as well. How do we know which is which? How do we account for that? You can't, because you're co-mingling the funds. You're mixing your personal and your business, and they should not mix. So let's think about this as well. Why is that a big deal? Besides the fact that you can't account for what is business and what is personal? I mean, after all, you're going to use it, right. I guarantee you and please let me know in the comments if I'm telling the truth, because I guarantee this is true when it comes time for the baker you know we've got that side hustle baking those cupcakes to buy more supplies milk, eggs, butter, and we know, eggs right now. Right, it's time for you to buy supplies. Now you're trying to hustle up money. Because why? You don't have the money? You just spent it on your daughter's birthday party because the funds were commingled. So not only are you commingling funds, so you cannot tell what's business and what's personal, but you also will not have clear money set aside for your supplies. Now, why is that an issue? Because if you don't get flour, butter, salt water, whatever it is that you need to make those darn cupcakes, you're out of business. Make those darn cupcakes, you're out of business. Why else is commingling funds an issue? Commingling funds is also an issue because, guess what? Here's the second thing that's keeping you broke.

Speaker 1: 3:38

Even though you have a side hustle, you haven't filed taxes on that money, so you also cannot file for the benefits or the deductions that you're entitled to as a business owner, and they are hefty. Everybody wants tax deductions. No one wants to pay taxes. Well, guess what? If you're not registered as a business? Guess what? You can't take the tax deductions that you're eligible for. Oh my gosh, yeah. So it doesn't seem like a big deal on the surface, but it is. Because now you've co-mingled funds, you can't account for it. You haven't paid taxes on it, which, by the way, technically is a crime Technically.

Speaker 1: 4:29

And there's also scripture that tells us to obey the laws of the land and to pay our taxes. It's in there, read the book. I'm serious, I am not kidding you. It is in there. So we want to consider that because there are so many deductions that you are losing out on that, if you really understood it you would be completely upset. I'll just leave it there. You would be upset. So you're not paying the taxes on it. So you can't get the deductions and for most of you I would say, especially those of you starting out and you haven't had a lot of clientele Most of you, I would say especially those of you starting out and you haven't had a lot of clientele those deductions are significant. The return that you would receive, the refund that you would receive, would be significant to you and could possibly set you up to help you scale right, using that refund to build your business. So you want to consider that you're not getting the tax benefits and technically you didn't hear from me you're committing a crime. Please don't put that in the comments. Okay, just make it right, but don't put it in the comments. You know that's how they got Al Capone right. They couldn't get him on all of the things he was doing killing people, selling illegal goods but he didn't pay his taxes. They put him away. I'll wait, all right.

Speaker 1: 5:56

Here's another reason that you really are not seeing the kind of money you should, even though you have a side hustle, because you're commingling funds, because you're not filing tax returns. You cannot file for things like there are all kinds of economic advantages or loans, very low interest loans or no interest loans, grants and programs you don't qualify for because, guess what? You're not a business. You're just somebody baking cupcakes, which there's nothing wrong, by the way. You're a really good cupcake baker. See you, girl, all right.

Speaker 1: 6:37

However, because you don't have any of the paperwork needed, you don't have any of the proof, you don't have any of the documentation. You're co-mingling funds, so you do not have a business bank account. We cannot get your statements because when you go to file for these things grants, programs I will tell you I even won a grant and a business competition. But guess what? I had to supply them with my registration with my state as a business, my last year of tax returns yeah, you guessed it as a business and three months worth of bank deposit statements. Guess what, as a business. They wanted that in my EIN number and we'll talk about that in some other episodes, but it is very, very important because a lot of us would be eligible for a lot of different things that we can't take advantage of right now Because, guess what, we're not officially a business.

Speaker 1: 7:39

So if you have a side hustle and you are co-mingling funds and you're not filing your tax returns and you don't have the appropriate paperwork that filed with your state, you are missing out on all these opportunities and it's costing you and keeping you broke. Now, I know I said that I was going to give you three, but I think let me just check if I think I may throw in another one. Oh, okay, so another reason I am going to throw in this extra one. Another reason that you are not seeing the kind of money that you should see, even though you have a side hustle, beyond commingling your funds, beyond losing out on humongous tax benefits oh, by the way, you do know that the current, as of this recording the current tax code, probably 90% of the deductions are for businesses, not individuals. C'est la Think calmly, quietly and long on that. And also because you cannot take advantage of different programs and different things you'd be eligible for because you don't have the appropriate paperwork.

Speaker 1: 8:52

In addition to that, if you don't have all of these things in place, you're actually just making yourself exhausted. So you're expending energy in keeping this business going, but you're not progressing. You can't scale it because it's not a business. So when we talk about scaling, scaling means you make your business bigger, right? So you grow. You can't grow because you're not a business. And even if you are experiencing growth, it is stunted because, guess what, you're not a business. Your paperwork is not in order. Let all things be done decently and in order. So here's the thing. Here's the thing. Let's go back to our baker. So we bake those 10 cupcakes. Our money is commingled Because our money is commingled.

Speaker 1: 9:48

Now I am hustling to get the money together because I got an order for three cakes this weekend, but guess what, I don't get paid until Tuesday. I need that money by Friday because they're going to pick up those cakes on Saturday. So I took a deposit, but guess what? Eggs cost much more than I thought. They did. So and I didn't. I don't have any of the financial paperwork that I need to know how much I should really charge. Okay, we'll do that in another episode, because pricing is a whole other ball game, right? So I don't. And and and, and on top of, on top of all of that, right, because the economic climate has changed, the employment climate has changed in the US. I'm not even sure if I'm getting a paycheck on Tuesday, but I need to get these cupcakes out on Friday.

Speaker 1: 10:40

So here is the thing I am now stressed on top of everything else I'm expending energy, but I'm not moving forward. I'm not expending that energy and growing. I'm not expending that energy in participating in things that are going to make me even more profitable. I'm expending energy now in trying to rob Peter to pay Paul so I can get what I need to bake the next set of cakes, rather than have a business account that's set aside and we'll talk about this, too, in another episode a business account that's set aside so that I have the money I need when I need it, for the raw materials to make what I need to make. So it's like I'm expending energy, but I'm not getting any. I'm not moving forward. I'm kind of running in place. So I'm tired, I'm stressed and I'm having to use my creative ability to figure out how I'm going to get enough money to make sure that I have my raw materials, rather than to create these beautiful cakes rather than to create these beautiful cakes.

Speaker 1: 11:38

So, for that reason, doing business as a side hustle rather than a legitimate business oh Lord, have mercy is keeping you broke, broke and stressed, and the last thing you need is some extra stress. So I promised you three, but I gave you four. I always want to give you a little bit more for your troubles. I am telling you, it is time, it is the season where you should consider making this side hustle a legitimate business, and we're going to talk more about that in coming episodes. In the meantime, be sure to share this with your friends who also have a side hustle and come back for more. Be sure to like and share. Be sure to save this with your friends who also have a side hustle and come back for more. Be sure to like and share. Be sure to save this episode, because you're going to need to refer to it. I love you lots and I'll see you soon. Bye, bye for now.