What does your side hustle say about your money personality?

With the cost of living still squeezing budgets, more people are looking for ways to bring in extra money. Selling clothes online, teaching a skill you already have, or taking on freelance work outside your day job have all become common ways to top up income. 

According to PensionBee research, 49% of UK adults have a side hustle. Another 12% have had one within the past two years.

Most people aren’t trying to  build a big business with half of side hustlers earning less than £100 a month. While everyone spends their earnings differently, only 5% put any of it towards a pension. 

That might have something to do with our different money personalities. Financial psychologists have long studied how personality traits shape our financial behaviour. Research into money personality types shows that the way we think about money can influence everything from spending habits to saving discipline. 

The same is likely true of side hustles: our money personality can shape everything from why we start one to what we do with the extra cash. 

Here are some of the most common money personalities.

The ‘Money Maker’

‘Money Makers’ are often looking for ways to earn a little more. They may work longer hours or pick up overtime. So it’s perhaps no surprise that they feel at home in the side hustle economy.

A side hustle can offer something a salary often can’t - a clearer link between the work you put in and the money you make. But earning more today doesn’t always mean having more for the future.

When just 5% of side hustlers put their extra income into a pension, that raises an important question: what do you want that additional work to add up to?

If you’re already putting time and energy into earning more,  consider putting some of that money to work for your future. Even small pension contributions could have more time to compound and benefit from potential investment growth.

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The ‘Spender’

When you’ve put hours into your side hustle, it’s understandable to want to enjoy your extra income.

That may sound familiar if you’re ‘The Spender’.

PensionBee research found that 31% of people use their side hustle money to treat themselves, including on holidays, clothes and eating out. Another 17% spend it as it comes in, without a particular plan. And there’s nothing wrong with enjoying money you’ve worked hard to earn.

But consider how the extra income might help with your longer-term goals.

One approach could be to decide how you’d like to split the money before it arrives. You might enjoy some now, while putting a little towards savings, investments or your pension.

That way, your side hustle could give you something to enjoy today, while also helping you save for the future.

The ‘Saver’

For ‘The Saver’, watching a bank balance grow can feel just as rewarding as spending the money. And plenty of side hustlers seem to share that. Almost a quarter use their extra earnings to build up savings. Another 14% are saving towards a specific goal, like a house deposit.

Putting some side hustle income aside can make sense, particularly when that income changes from month-to-month. Cash savings can help you build an emergency fund so that if your side hustle has a quiet month, you'll know there's something there to fall back on.

But once your emergency savings and nearer-term goals are covered, it's worth asking a different question - what about your future self?

The ‘Saver-Splurger’

If you’re a ‘Saver-Splurger’, money from a side hustle might feel a little different from your regular salary.

Your salary may already be set aside for things like your mortgage or rent, bills, groceries and pension contributions. Money from a weekend project or selling something online can feel more like disposable income, giving you a bit more choice over what to do with it.

That's where The Saver-Splurger can emerge.

You might diligently save your side hustle income for several months, only to spend the whole pot when something catches your eye.

If that sounds familiar, a sinking fund could be worth considering. 

Rather than relying on whatever you feel like doing that month, you could decide in advance that a proportion goes towards spending, another towards shorter-term savings and another towards your longer-term future.

You still get to enjoy the extra money without every month becoming a negotiation with yourself.

The ‘Worrier’

Not everyone starts a side hustle because they want more spending money. For some, earning extra is about security.

The most common use of side hustle income was covering day-to-day living costs, cited by 39% of respondents. Another 19% use it to pay down debt.

And when asked why they weren't paying their side hustle income into a pension, 22% said they couldn't afford to because the money was needed for essentials. For `The Worrier`, a side hustle might provide something more valuable than luxuries.

The ‘Gambler’

‘Gamblers’ tend to be drawn to big risks and bigger rewards. They're comfortable with uncertainty, and that same appetite can fuel a side hustle. 

But unpredictable income can make planning harder. And one-in-five side hustlers who don't pay into a pension say their earnings feel too unpredictable to commit to.

Setting aside a small amount before you spend the rest can help. And with PensionBee, you can pay in as much or as little as you like, whenever suits you. There's no fixed schedule to stick to. 

Could £1,000 of side-hustle income become £154,000?

Whatever your money personality, one of the most powerful ingredients for retirement saving is time.

The UK trading allowance means eligible individuals can receive up to £1,000 of qualifying gross trading income each tax year without paying Income Tax on it. Different rules apply depending on your circumstances, and if gross trading income exceeds £1,000 you may need to register for Self-Assessment.

Imagine you put £1,000 of side-hustle earnings into a personal pension each year, Instead of saving it in a regular bank account.

Someone starting at age 25 and continuing with £1,000 per year until age 67 could build around £154,000 in today's money.

Starting at 35 could produce around £91,000, while starting at 45 could still produce around £49,000.

Note: These projections assume a 5% net annual investment return, a 0.7% annual management charge, 25% basic rate tax relief on contributions and 2% annual inflation, with retirement at age 67. Figures are rounded and stated in today's money. Investment returns aren't guaranteed and your pension can fall as well as rise in value.

The takeaway

There's no single way to use side hustle income, and it’ll vary depending on your circumstances.

If it's helping you pay the bills, that's an important job. If you're paying off debt, building emergency savings or saving for a house, those are important goals too. And sometimes, spending money you've worked hard to earn is exactly what you want to do.

Once you recognise those habits, you can decide whether they're still working for you. And if your side hustle is already helping you earn more today, perhaps a little of it could help pay for tomorrow too.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice. 

Please note that tax rules change regularly, and the actual tax benefits you receive will depend on your individual circumstances. If you’re not sure, please seek professional advice.