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What to Do When You Have More than One Income Stream

Why it’s important to track your income streams

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It can be easy to lose track of separate income streams; Excel is a great tool for monitoring which work your income is coming from.

IF YOU’RE AN INDEPENDENT contractor, or you’re a full-time employee about to start up a side business, then you need to be able to keep a good track of all your income streams. There are a couple of reasons for this and both of them relate to tax. 

Basically, income is income, regardless of how you earned it, and you’ll pay tax on the total amount. As an employee of another business, you’re likely to be earning money through your tax file number. Each week, your employer will withhold tax commensurate with how much money your employer has paid you. But this doesn’t take into account any other income.

If you’re also earning money from a side business, using an ABN, there’s no one to withhold tax on your behalf, so you need to keep a close eye on your income to ensure you have enough money in the bank to pay your tax bill — which you will get, I’m afraid — after your tax return has been filed.

Two tax returns? Use Excel

Although income is income, you will still have to file two tax returns, one for each income stream. That’s why you need to keep an eye on your accumulative income, and not just the money earned through your business.

There are lots of personal finance and budget apps that help you to track and manage your income, but the easiest, most flexible and most straightforward way to do this is to create an Excel spending or expense sheet, which our Excel training courses will teach you how to do.

Reasons why people have two income streams

It’s not just full time employees who are starting their own side business that have two income streams. Plenty of freelancers and independent contractors earn money through their ABN and TFN.

There are some businesses that prefer to put contractors on the payroll, usually because they’ll be working on a regular basis, onsite, and it’s just easier for the business to employ them as casuals. Often for insurance purposes, but it’s also because the work involved doesn’t conform to the definition the ATO uses for an independent contractor.

Other times, it’s because the contractor or freelancer is working in an entirely different industry on the side — hospitality or retail, for example — to supplement their freelance income, which is how a lot of people get businesses off the ground.

Focus on how to earn money

The main take away from all of this, is that when you’re tracking your income, focus on the ways to earn more income. If you discover that each month, you have a week where your income is lower, there’s an opportunity to fill that gap with another job or other income stream.

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You can learn how to create and manage your expenses or spending in our Excel training courses, where you’ll be able to create your own spending or expense sheet, and how to perform daily bank reconciliations in MYOB or Xero in our cloud accounting training courses. For more information, visit our website.


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The Great Compression

There are lots of reasons why it’s a great time to start your own home-based business. I’ve talked about the perks of working from home before, for instance. But perhaps one of the best reasons to start your own home-based business is that in today’s job market, it actually offers more job security. Now, this may be pretty much the opposite of what nearly everyone else says about being self-employed, but bear with me.

In our Small Business Management Course we look a little at business finances and how they can affect the business cycle. In economics, the slowing down of the business cycle, accompanied by a decline in the housing market, the stock market, and an increase in unemployment for more than two consecutive quarters, is referred to as a recession. And if that economic downturn continues long enough, it’s then considered a depression.

We’re technically no longer in a recession, though some parts of Europe still are – namely Greece and Italy, for example – yet there seems to be fewer jobs on offer. Indeed, Australia’s national unemployment rate hasn’t been this high (6.4 percent) for more than two decades, so there are certainly fewer jobs around. But could it also be a case of jobs becoming smaller?

The Compression Effect

I’m inclined to think so. Underemployment is on the rise as many businesses find they no longer need to employ a full time receptionist, because new technologies like VoIP and virtual answering services have made it possible to contract those services out to other companies.

In this sense, we’re entering a period of Great Compression, where jobs are being compressed down from five-day-a-week full time positions to two-day-a-week contract jobs. But because I’m a ‘glass half full’ kind of guy, I don’t necessarily see this as a bad thing for workers.

In fact, I see this as a great opportunity for those go getters who have always wanted to start their own business, but who were previously unable to get a foothold in their industry, because their area of expertise – administration, for example – had always been a full-time position that had to be performed in the office.

Specialise Early

Now, with the help of cloud-based software, like DropBox and MYOB’s Account Right Live, most administration tasks can be performed remotely by a virtual assistant; even answering business calls can be routed to a virtual assistant based anywhere in the country with the use of a Voice Over Internet Protocol (VoIP) service.

For people who want to start their own home-based business, this Great Compression of jobs makes it possible to carve out a niche for yourself by specialising in a particular service or area of expertise and contract your services out to other businesses.

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WorkFace has a number of home-based business opportunities available across an array of industries, including work health and safety, training and education, bookkeeping, and online marketing, to name just a few.

If you’re interested in becoming a home-based independent contractor, specialising in one of the industries we have on offer, register your interest on the WorkFace website, and our team will contact you with more information on the opportunity you’ve expressed an interest in.

This post was originally published at the WorkFace website.