Data Architect by Day, DJ by Night: What Do You Do With an Extra $30,000?
By Andrew Pham, CPA
TL;DR
An extra $30,000 from DJing is great until you have to decide what to do with it. Over three conversations, Andrew and Nicholas built a 13-week cash flow runway, worked out how much of his W-2 salary he should invest in himself, and mapped out what his tax return will look like on April 15 so he isn't scrambling.
The numbers
- Side income
- An extra $30,000 from DJing
- Day job
- Data warehouse architect
- Conversations
- Three
- Planning tools
- 13-week cash flow runway, April 15 tax preview
The DJ at a college party
Andrew first met Nicholas in college. Nicholas was the one behind the decks at a party, keeping the room moving.
They lost touch after school. Eight years later, they reconnected.
By day, data. By night, the mix.
During the day, Nicholas is a data warehouse architect. At night and on weekends, he's still a DJ.
The difference now is that the DJing pays. Nicholas mentioned he's able to DJ on the side and make an extra $30,000.
The $30,000 question
Making the money wasn't the hard part. Knowing what to do with it was.
"I don't know how much to keep for the business or spend it on bottle service to help promote my brand further," Nicholas told Andrew.
It's a fair question. When a side hustle starts throwing off real cash, it's tempting to reinvest all of it in looking successful. It's just as tempting to spend it. Neither works without a plan.
Conversation one: a 13-week runway
The first step was seeing the cash clearly. Andrew helped Nicholas measure a 13-week runway of cash flow: what's coming in from gigs over the next quarter, what's going out, and how much cushion is left over.
With a rolling three-month view, a slow month stops being a surprise, and a big month stops feeling like free money.
Conversation two: how much to invest in himself
Next came the bigger question. Nicholas has a steady W-2 salary from his day job. How much of that salary should he use to invest in himself and the DJ business?
That's a personal decision, but it shouldn't be a guess. With the runway in hand, they could talk about an amount Nicholas could put toward the business without putting pressure on his regular paycheck.
Conversation three: what April 15 will look like
Side income doesn't come with withholding. Nobody takes taxes out of a DJ gig the way an employer does from a paycheck.
So the third conversation was about what Nicholas's tax return will look like when April 15 comes around: the W-2 income, the DJ income and expenses, and what he'll likely owe. The point was simple. No scrambling in April.
What are you doing after work?
Maybe your thing isn't DJing. Maybe you tutor, take photos, coach, bake or fix cars. If people are already paying you for it, it's worth knowing what the money is actually doing for you.
Know your runway. Decide what you'll reinvest on purpose. And know what April looks like before April gets here.
If your side hustle is starting to throw off real money, give us a call. We'll figure it out with you.
How the work went
- 1
Built a 13-week cash flow runway
Mapped what comes in from gigs and what goes out over the next quarter, so slow and busy months stop being surprises.
- 2
Set how much of his W-2 salary to invest in himself
Used the runway to choose an amount to put toward the DJ business without pressuring his regular paycheck.
- 3
Previewed his April 15 tax return
Combined the W-2 income with DJ income and expenses to see what he'll likely owe, so tax time isn't a scramble.
Questions people ask about this one
Do I owe tax on DJ income if I already have a W-2 job?
Yes. Side income from gigs is generally self-employment income reported on Schedule C, and it can also owe self-employment tax. Your W-2 withholding usually doesn't cover it, which is why planning ahead matters.
Is bottle service deductible if it promotes my brand?
Generally no. Since 2018, entertainment costs are not deductible, even when the goal is to promote your business. Advertising is different: things like flyers, sponsored posts or a website can be deductible business expenses.
How do I avoid a big tax bill in April from side income?
Common options are making quarterly estimated tax payments or increasing the withholding at your day job to cover the side income. A CPA can project the number so you set aside the right amount.
What is a 13-week cash flow runway?
It's a rolling forecast of cash coming in and going out over the next 13 weeks, about one quarter. It shows how much cushion you have and makes it easier to decide what you can afford to reinvest.
Discussion
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