Starting A Side Hustle? 5 Steps To Manage Your Bank Account
Are you starting a side hustle? Whether you're exploring a new entrepreneurial idea or turning a hobby into a business, the best way to handle your finances is to start the way you mean to go. And that means obtaining a checking account for your enterprise, no matter how small. Here are a few steps to maximize the benefit of this simple bookkeeping move.
1. Look for Free Accounts
Because you're starting out small, keep expenses as low as possible. Look for free checking accounts, even though they may have fewer bells and whistles. At this stage, you don't need a lot of perks and modern free accounts usually have much of the same foundation tools as more expensive ones.
2. Keep Business Activities Separate
The primary purpose of a business checking account when you start out is to develop the habit of separating personal and business finances. This is vital if you incorporate your small business to protect yourself from liability for business activities. However, even those not incorporating should always use a business account solely for business in order to reduce confusion, show good faith, and make record-keeping easier.
3. Use Online Expense Tools
What tools does your financial institution offer to help track your expenses? Learn more about these to help yourself. For example, most systems allow you to categorize expenses from either a preplanned list or a personalized set of account labels. They may also offer quarterly, annual, and customized reports of how you spent your money. Let the bank do this work for you.
4. Track Your Own Income
Keep track of your own income — even if you expect to receive tax forms like Form 1099 from clients. Why? Most importantly, your clients may get it wrong, leading you to under- or over-pay taxes. However, the IRS deems each business owner responsible for accurately reporting income — not the clients. Ask how your checking account's tools can help.
5. Meet With a Personal Banker
After being active in this pursuit for a while, analyze what could help you grow the business. Is it time to add other accounts or invest some money? Could you use a loan to fund scaling upward? Do the expense or income categories not give you enough information? Do you want free training or workshops? Most financial institutions offer a range of services that can help you reach even more goals.
Where Should You Start?
Ready to get started on your personal side gig? No matter what you want to do to develop that new income stream, start by meeting with a bank or credit union today to learn how they can help.