Whether it’s your only source of income or a side hustle on top of your regular gig, part-time jobs are a great way to make some money while keeping a flexible schedule.
But part-time work comes with some budget complications you may not be aware of. Here are some strategies to consider if you have a part-time job.
If your part-time job includes freelance or gig economy work, you may be eligible to deduct related expenses on your taxes to reduce your overall tax burden.
For example, if you teach Pilates a few nights a week, you may be able to deduct training courses, workout clothes, or equipment. You can also deduct the cost of driving to and from the Pilates studio.
Take time every week to go through your transactions and mark which ones are tax-deductible. If you’re not sure whether or not an item is deductible, contact a tax professional who specializes in your industry. You may have to pay a consulting fee, but there’s a good chance you’ll earn more money back 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 come as a huge shock at tax time if you’re not prepared. Freelance workers and non-employees, like gig economy workers, are required to withhold their own taxes.
A basic rule of thumb is to save between 20% and 30% of your untaxed income for taxes. For example, if you complete a $200 freelance graphic design project, 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.
Manage cash carefully
If you work part-time as a waiter or bartender, you may be paid in cash tips. If you want to avoid making frequent trips to a bank or ATM to deposit that money, you can start using the cash envelope budgeting method.
Here’s how it works. Divide your categories into individual envelopes and insert the predetermined amount of cash in each envelope. If you don’t want to carry a huge wad of cash in your wallet or purse, you can budget for a week of expenses instead of a whole month.
If you prefer to shop using a debit or credit card, deposit the cash in your bank account regularly so you don’t accidentally spend it. It’s hard to track cash transactions, so unless you plan to use the envelope method, deposit any cash you earn quickly.
If you only have a part-time job
Review your budget often
If you’re living on a part-time salary, you probably have little margin for error in your budget. The best way to avoid going over is to monitor your spending often. Check in at least once a week and see how your actual spending aligns with your projections.
If you spend more than you’ve allotted, see if you can cut back on a different category. If that’s not possible, try to find a way to pick up more hours at work. Always leave some wiggle room in your budget to account for going over.
Overspending regularly in one particular area can be a sign that you’re not allocating enough money in that category. If this keeps happening, you may have to revise your budget to make more room in that specific category. This may involve eliminating or reducing a fixed expense, like moving to a cheaper apartment, getting an extra roommate or cutting a subscription service.
If you have a full-time and a part-time job
Take advantage of benefits
Many companies offer benefits even if you’re only working part-time. These can include matching retirement contributions, tuition reimbursement, health insurance, stock options and paid time off.
Talk to the HR department and learn how you can take advantage of these benefits. You never know what kind of unusual perks may be included, like a free gym membership or discounts to other businesses.
These benefits may 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 major company, they may have a less expensive health insurance plan than your full-time job – especially if the latter is a small business or nonprofit.
Always utilize an employer’s 401(k) plan if they match employee contributions. Employer contributions are essentially free money, and the rule of thumb is to always contribute enough to receive the free match. You’re allowed to have multiple 401(k) accounts, as long as you don’t exceed the $19,500 annual contribution limit.
Have a reason for working more
Working a part-time job on top of a full-time job can be exhausting, and you’ll get burnt out if you don’t have a specific reason for working so many hours.
It’s not enough to want more money. It has to be something personal and motivating, like “I’m saving so I can take a three-week trip to New Zealand next year,” or “I’m working 60 hours a week so I can save for a down payment.”
Keep the reason top of mind by having pictures of your goal somewhere close, like on your phone’s background, your refrigerator door, or your bathroom mirror. This will serve as a consistent reminder why you’re working so many hours.
Avoid lifestyle creep
When you’re working a part-time and a full-time job, you may be tempted to treat yourself to alleviate the stress. For example, you might order takeout instead of making dinner. Doing this once in a while is fine, but making it a regular habit can negate the whole point of taking on extra hours.
Build in treats as part of your budget and find low-cost ways to relax, like hiking with a friend or hosting a game night at your house. If your part-time job is paid on a project basis, you could allocate a certain percentage for discretionary purchases. For example, you could decide to spend 20% of what you earn and save 80%.