How Income From Your Side Hustle Can Fuel Your Savings and Investments

The concepts of saving and investing can feel a little overwhelming, especially if you’re someone like me who has spent a lot of their adult life in freelance work or spread across multiple jobs at once. Before I started working at Fruition, I was a full-time freelancer. And while I built a solid six-figure career, I never found myself in a good flow with saving money. I also didn’t start investing money until I was well into my 30s. The irony is that it wasn’t until I put full-time freelance down and took a W-2 job that I figured out what I had been missing.

In this article, I’ll share with you nuggets of wisdom I’ve collected along the way. Everyone’s situation is unique, but whether you have a side hustle that earns you extra cash each month or if you’re a full-time gig-worker, you can apply these principles to your savings and investment goals. More importantly, if you have little or no savings and haven’t started investing, this could be the aha! moment you need to get started.

How does irregular income affect the way you plan financially?

You might be like current me, working a full-time job at a company while also doing part-time gig work. Or, you could be more like past me, someone who freelances full-time. What both situations have in common is that part (or all) of your income is irregular. This type of earning can have you pushing budgeting, saving, and investing to the back burner. Let’s explore the common traps for both.

The side hustler’s income trap

When you have a steady W-2 paycheck covering your basics, side hustle money often feels like "bonus cash," and that can create a problem. Without a specific purpose assigned to this money, that extra $500, $1,000, or $2,000 can evaporate through lifestyle inflation. It might end up covering dinners out, a spontaneous purchase, or it simply gets absorbed into your checking account, where it gets lost in the sauce with the rest of your cash.

This doesn’t mean that the trap is frivolous spending. You just need to give your extra cash a job. Doing so will feel incredibly empowering because this money becomes a tool to help you build security. And the psychological shift from "bonus cash" to "strategic money" is what can transform side hustle income into a wealth-building machine.

The freelancer’s income trap

Full-time freelancing brings an entirely different challenge because every dollar you earn feels essential since there’s a pattern of irregularity in your income. When a big payment hits your account, the immediate instinct is relief. In my own experience, it felt good to cover some bills or to simply pay myself. After the bills were paid, that feeling of relief was followed pretty quickly by anxiety about covering next month. This feast-or-famine cycle made it incredibly difficult to separate my current living expenses from future planning.

I lived in this cycle for a long time before I finally wised up. Even when I had strong earning months, I struggled to move money into savings or investments because I could never quite trust that next month would be equally strong. The pull to treat myself for my momentary success also took hold. And even when I moved money into savings, I didn’t have the budgeting infrastructure to keep it there. It eventually paid a bill sometime in the following months because I didn’t plan well for an inevitably lower-earning month. It’s almost like the win of getting a fat paycheck made me totally forget that my best month wasn’t going to be every month. The irregular income wasn't just a budget issue for me—I ultimately needed to adjust my mindset to move forward in a productive way.

When you're navigating the ups and downs of irregular income, whether from freelancing or side work, creating a budget that accounts for pay variability is a game-changer. Gilles Hudelot, our Director of Education, breaks down exactly how to approach this in his article How to Build a Smart Budget That Survives When Your Income Changes Every Month. He makes some suggestions that I don't cover in this blog, so definitely check out his article for a deeper dive into successfully budgeting as a gig-worker. His framework helped me finally understand why my old approach didn’t work.

The order of operations: Emergency fund first, debt payoff next, then investments

For this next part, I’ll use my current and previous job situations as examples so you can see just how easy it can be to lock in a savings and investment strategy for either scenario. Keep in mind that my personal experience may not jive with where you are currently, and the only piece of advice I’m truly giving in this article is to consult a financial expert to help you tailor your plan to your needs.

Regardless of whether you’ve got a side gig or are gigging full-time, most experts recommend having an emergency fund, and only after you’ve saved 3-6 months of living expenses should you move on to your investments. Before you move on to your investments, you might also need to take action on paying off some high-interest debt first.

So how do you escape the common traps and actually make progress? Let me show you what worked for me…

Scenario A: Full-time employee with a side hustle

I stepped away from full-time freelance photography and marketing work when I was offered a position at Fruition. I had been experiencing some serious burnout after years of being alone on my self-employed island, so the shift was enticing. This career pivot ended up giving me a different perspective on personal finance, partially because I spend my days producing content about it, but also because I had a predictable income to plan with.

Now I am a Project Manager for my W-2 role, and I teach yoga a few times a week. My sweet little side hustle earns me roughly $1000 per month, give or take. At some point, I realized this extra cash could be more useful to me if I stopped thinking of it as income to cover my bills.

Here's the framework I followed to get ahead:

1. Create your monthly budget using only your W-2 income, and transfer all your side hustle income into a high-yield savings account (HYSA) until your emergency fund reaches the point where it can cover 3-6 months of living expenses.

2. Pay off any high-interest debt (a financial professional can help you determine which debts to prioritize).

3. Once your emergency fund is flush and any pressing high-interest debt is eliminated, you can shift your side hustle income to retirement investments, like a SEP-IRA, Traditional IRA, or Roth IRA where compounding interest can work its magic.

Why this order matters: When you have the stability of a W-2 job, your side hustle income becomes pure opportunity. If you treat it like "invisible money" that goes straight toward a specific goal, you can avoid lifestyle creep while accelerating your financial security and wealth building.

Don't forget about taxes: If you're earning side hustle money as a contractor (1099), you're likely going to owe quarterly estimated taxes. You should consult with a tax professional to plan these payments and avoid penalties at tax time. Take it from me… I’ve learned this the hard way!

Scenario B: Full-time freelance or gig worker

I built my professional life around freelance work. I started in the music industry, and my work eventually evolved into corporate photography and marketing consulting. Over the years, I built relationships with some big-name clients and nurtured a solid six-figure business. All things considered, I felt successful in my ability to make the client connections and get paid!

The problem wasn't that I wasn't earning enough; it was that I was running on a flawed system. I lived off the high of my best months instead of the reality of my leaner ones. When a substantial payment came in for a project, I'd immediately adjust my lifestyle accordingly, as if it was always going to be that way. Then a slower month would hit, and I'd be raiding whatever I'd managed to save just to cover the basics. I wasn’t being real with myself when it came to my budget (or lack thereof, if I’m being completely honest).

If I could go back in time, this is the framework I wish I'd followed:

1. Look at your income for the last 6-12 months and build your monthly budget around a lean month. This will ensure that you have what you need to cover necessities when income is erratic.

2. Commit to a small emergency savings goal even during the leaner months ($50-$100 counts, and it keeps you in the habit of saving).

3. When the more robust earning months hit, direct all income beyond your lean-month budget straight to your emergency fund.

4. Once your emergency fund reaches 3-6 months, then you can tackle any high-interest debt aggressively with that extra income.

5. After high-interest debt is cleared, shift extra income to retirement investments (SEP-IRA works great for self-employed folks).

6. Only after your emergency fund is solid, high-interest debt is cleared, and you're consistently investing should you adjust your monthly budget to accommodate lifestyle upgrades. And when you do, it feels like a well-earned win!

Why this order matters: The feast-or-famine cycle will keep you from making much progress with investments and debt payoff if you don’t stick to a budget and keep an emergency fund. This approach helps ease your anxiety during slower months and helps you find security before you focus on building wealth.

Again… taxes: You may owe taxes on freelance income if your client/employer is not withholding for you. Consult with your tax professional to make sure you are paying those taxes quarterly. I always kept that money in my HYSA so it was earning interest until I had to pay it.

A personal note on the topic of debt

I know talking about debt can be a sore spot for a lot of people. Debt can feel extremely suffocating at times. Sometimes life takes us down a road where we find ourselves owing a ton: medical debt, business debt, consumer debt, etc. But it really doesn’t matter what got you there; what matters is that you love yourself enough to take the situation by the horns and show it what you’re made of. Give yourself some grace.

I am someone who has borrowed and paid off hundreds of thousands of dollars of business and personal debt over her adult life. Some of this debt helped me grow my businesses, but a lot of it was from poor choices and an inability to budget well in my 20s. It wasn’t until I forgave myself for being young and green that I was able to take the first step toward financial freedom.

If you have a lot of debt, do not be afraid to look at it, my friend. Getting real with yourself can be an extremely sobering experience, but ignoring a problem will not help you grow or heal. I promise you that no matter where you are today on your financial journey, you too can build a safety net, pay off your debts, and start investing for your future.

You don’t have to make a lot of money to accomplish significant financial growth either. Even though I experience what I consider to be a tremendous amount of privilege in life today, I didn’t have rich parents (or involved parents for that matter), and I was not afforded the opportunity to get a college degree. While my friends were enjoying their college experiences, I was cleaning houses, serving pizza, and slinging Ed Hardy t-shirts at the mall. And it’s safe to say most of my recent financial success has come from trial and error, life experience, and discipline—not from earning a lot of money at my job. So go ahead and throw out any old victim mentalities you might still be replaying in your head because the truth is the challenges in your life can be the fuel to your success if you let them!

Find a financial mentor to help you get started

My experience is my own, and my strategy is not one-size-fits-all. But I hope this has sparked some inspiration for your own journey. I know I would have reached this point sooner if I’d had a financial mentor in my life, so I urge you to find yours! You don’t have to figure this all out on your own. You can book a 20-minute or 50-minute Mentor session through your Fruition account and get started on the right foot. Our Mentors specialize in a variety of financial areas, including budgeting, retirement, and investing. They can help you get started with budgeting and tracking expenses in your Folio, and help guide you toward the next best steps for your financial future.

And hey, if this once-broke college dropout can get on the right track, you can, too. It’s never too late!