Kyle has been volunteering with the production team at our church for about a year, mostly running the slides and handling the video-playing. One of the men who runs the sound board is taking a sabbatical and they are looking for someone to fill his weekends. Kyle has wanted to learn how to run a sound board for a while so this is a perfect opportunity. Plus, we found out that it is a paid position, not volunteer as we had thought!
When Kyle tallied up how much this side hustle might earn him ($70-80 every three weeks) he blurted out “I’ll be able to buy a Kindle!” But what was running through my head was “Actually, you’ll have to save up twice as long because of taxes, tithe, and retirement!”
The reason I thought this is because of the rules we and the government have concerning our income. When we have an extra $10 here or there in income I don’t worry about changing our contribution levels, but I don’t consider a regular paycheck, however minor in comparison with the bulk of our income, to be negligible.
Taxes: This additional income will of course be taxed at our marginal tax rate, 15% federal + 7% state, instead of our overall tax rate (8% federal and 4.5% state), so that’s a 22% bite right there.
Tithe: We would give 10% of this income away, either to our church or other charitable organizations.
Retirement: I think that 15% toward retirement is a good baseline, and since we are not yet maxing out our Roth IRAs I would want to take a portion of this hustle to bump up our contribution.
All together, those obligation sum to 47% of the income. It’s quite demotivating to realize that we’ll only get to pocket half of what Kyle makes from this hustle!
Do you consider your various obligations when you receive a paycheck from your side hustle, or do you ignore them until you square everything up at year-end? What percentage of your extra income is spoken for?
photo from ceasedesist