For many, nothing could be more boring than keeping spreadsheets and tracking expenses (like mileage tracking), but any rideshare driver worth their salt will do just that. RSG Contributor Andrew is going to take you through six tips of what to do—and what not to do—when setting a budget, tracking your expenses and overall knowing what to expect as a driver—especially when the unexpected inevitably happens.
Driving for a living can be hard if you don’t have the mindset and budget for taking care of the vehicle and preparing for any scenario, especially when you are driving your own vehicle.
Between balancing your income for personal use, funneling money into your business account with the proper budget needed for that week, and preparing for paying future taxes while transfering money into a savings account, success starts with planning for the worst but hoping for the best.
- Avoid company-supplied credit and debit cards; they won’t help you build credit.
- Keeping records allows you to follow patterns month to month and year over year.
- Don’t forget to set aside money to pay for taxes!
- Concerned about doing your taxes “wrong”? Let 1-800Accountant help you out! Learn more at our 1-800Accountant review
6 Important Factors to Setting and Following a Budget
Below are 6 key things you should consider and do when setting and following a budget for yourself as a rideshare driver. Remember, this is your business, so treat it like one.
Figure out a vehicle that works best for you & your market
When starting rideshare, using the vehicle you have currently is highly recommended, as investing into a new vehicle without an expected income forecast could put you into a negative balance over time. However if you have been doing rideshare for a while, you will have an idea of what your budget will be.
Between reducing costs by buying domestic and getting a fuel efficient car, you could potentially save yourself thousands on parts replacement during the time you own the vehicle.
Learn more about the best cars for rideshare drivers.
Personally, I drive a 2019 Ford Fusion Energi Platinum after starting out with just a 2009 Mitsubishi Galant SE.
After months of slowly grinding away, I figured out what the typical demand would be for my market.
As Saint Louis has more bar pickups than airport runs, the Energi worked perfectly for having an easy to clean cab with little storage space as I use the front seat to store luggage when needed.
Never use the company-supplied debit cards
Uber will send you debit cards that are binded to your respective accounts. These cards are convenient and free, but they will cost you if you do not connect those accounts to a bank account.
Credit companies and banks will not see the income you put onto those company cards, making it harder for you to invest in future cars or any kind of property that you may get a loan on in the future.
Learn more about how to get a mortgage as an Uber driver.
Use a reliable app-based debit account to connect to your regular checking account
With reliable and consistent support, I find that CashApp is the best app-based bank to use for a business account as many local vehicle service businesses use CashApp. I use separate accounts to help organize my finances.
CashApp allows you the opportunity to offer cashless tips outside of the app as gig-based companies have allegedly taken tips in the past.
Looking for more gig work banking options? Ally is another highly recommended bank! Learn more about Ally at our Ally Bank Review.
Keep records of what you make each week for future forecasts
Lyft and Uber already incorporate record-keeping but unfortunately, it takes a while to look at older weeks due to a poorly designed user interface. I will reformat the daily information from Uber and Lyft into monthly charts making it easier to find my sales whenever I decide to recall it, so I can plan my work week more efficiently.
Obviously, you’ll never be able to exactly match what you made from the previous year, but with corresponding previous trends with the general market interactions and local events, you’ll be able to be more efficient with sales using sales forecasts.
Also, don’t forget to track your mileage! The best FREE apps to track your mileage.
Set a budget from your earnings every week
Once you start to understand what your additional expenses each week will be while ridesharing, you will be able to budget out expenses from your personal account. That way you’ll know how much will go into a debit, a business, and a savings account.
First, let’s talk about the banking accounts that I use. I use a credit union to hold my personal checking and savings accounts, and I use CashApp for my business account.
Keeping all these separate makes it much easier to organize your finances. My weekly deposits from Uber and Lyft go straight into my checking account.
Once I’ve gotten my deposits, I figure out how much I’ll need for personal expenses before I calculate what will go into my savings and business accounts. From that amount, $805 will be slowly trickled into my business account by a daily withdrawal of $115.
Easily adjust the amounts to suit your own budgeting needs
This may seem like a lot to extract from your checking account everyday, but this is to make it simpler when I have to pay bills for the vehicle or in case an accident occurs.
Now that we’ve calculated our personal and business expenses, we will put the remainder into our savings account.
This is very important as we pay a higher tax rate as independent contractors, so our savings will come in handy when we go to pay our taxes.
Set aside money to pay your taxes
Paying taxes can be pretty expensive in our line of work as we don’t get the opportunity to withdraw taxes from our weekly checks, except at the beginning of the 2021 when Uber provided an option to withhold 24% of our earnings to save for taxes.
Between this, saving our excessive earnings, and keeping all expense receipts, you should be prepared for tax season. Perhaps, you’ll even be able to get a new car or put a down payment on a house with your extra savings.
Don’t forget to bookmark our ultimate guide to rideshare taxes when tax time rolls around!
A balanced budget for rideshare is not only necessary to maintain your vehicle but to create better opportunities for your future.
Do you like these tips for setting a budget? What would you add to this list? Share your thoughts in the comments!
-Andrew @ RSG