Are you getting a Doordash paycheck each week?
I’m sure you already understand this part, that you aren’t an employee with Doordash, so that means you won’t be getting a paycheck from Doordash. As an independent contractor, they simply drop your earnings into your bank each week through Direct Deposit.
The thing that is really, extremely important is that you understand that what you get from Doordash is NOT the same thing as your earnings. If you spend everything right away, you can create some huge problems for yourself. Be smart with how you handle your deposit and create your own paycheck.
How to create your own Doordash paycheck
First things first: Stay away from using the instant pay feature. This is especially true if your earnings for Doordash and other gig apps are fairly significant. If this is a side hustle, you may have a little more freedom as long as your expenses and taxes are covered through other income sources.
But here’s the thing: Don’t spend all your money as quickly as you get it. You HAVE to take care of the important things first. Using that instant pay is a great way to get into trouble quickly.
One thing that I really recommend is, have your deposits from Doordash and any others be made to an account that is NOT your checking account. Put it where you won’t touch it until you create your Doordash paycheck. But don’t send it to a debit card, that’s just as bad. The best option is to have it go to a savings account or another account, where you can then transfer your money to your checking when the time comes.
First, understand your taxes.
If you don’t already understand what you will have to pay in taxes, stop right now and go figure it out. If you’re not sure how taxes work, absolutely definitely talk to a tax pro, right now. Seriously, folks, it’s that important. Being self employed without knowing how your taxes work is one of the easiest ways to get in HUGE trouble with the IRS.
You can look at a couple of articles we have on understanding your taxes. Episode 21 of our Deliver On Your Business podcast got into the topic of taxes, what your taxes might be, and it had some ideas on what to save for taxes. We also got into a bit more detail with this article and associated video. All of this is extremely important for you to know, because Doordash does not withhold taxes for you. You have to do that yourself.
Second: Understand your car costs.
We make the mistake of assuming gas and maybe oil changes are our only costs. Your car will cost you a lot more than just gas. Every mile of your car creates an expense beyond gas – each mile costs you in a lot of things that you end up paying for much later. That includes wear and tear, maintenance, and a reduction in your car value. Those are real expenses, it’s not just paper. Go to this article on understanding what your real expenses are on your car and get a good understanding of your actual cost per mile.
Now, create your Doordash paycheck.
Once you’ve received all your money from Doordash and any other gig income for the week, you want to do the following:
- Calculate what you should save for taxes. Use your advice from your tax pro. Do not take this as advice, this is only an example, but I figure 20% of my taxable profits. I figure my expenses as 58 cents for every mile I drove. I subtract that from the sum of all my payments to figure my taxable profit, and take that by 20%. Save that money in an account you cannot easily touch. You’ll need that for taxes. THAT is your tax withholding.
- Calculate your car expenses. Add up how many miles you drove. Multiply that times your cost per mile. Pull that amount out of your pay, set that aside into a car fund. Use that car fund to pay for your gas or other car expenses. This will make sure you’re not blindsided by the expenses as they come up – because they WILL come up.
- Calculate your benefits. If you do this full time, you want to give yourself some paid time off. I write more about this here. Are you going to put anything into retirement? Set money aside for your paid time off and any other benefits you want to give yourself.
Now that you’ve taken out your benefits, expenses and taxes, the money left over is your Doordash paycheck. Transfer that money over to your checking, it’s pretty much the same thing as your take home pay.
What if my Doordash paycheck isn’t enough?
The answer to that is probably the same thing you’d have to say if you asked if your paycheck for a job wasn’t enough. It’s either, make more money or find something that does pay enough. Taking a shortcut on your taxes, expenses or time off is NOT the solution. If there’s not enough left over after doing these things, that’s probably a good sign that you’re not making as much as you think you are, and that you aren’t earning enough.
As an independent contractor, and thus as a business owner, that means that maybe your business model just isn’t working. That’s okay. You can either figure out how to earn more, reduce expenses (or both) or it’s time to know when to say when. But do not just avoid taking these things out just to have the money. All you are doing is kicking whatever the issues are down the road. You leave yourself vulnerable on your taxes, you leave yourself in a spot where you won’t have the money to do the repairs and maintenance on the one thing that is most important to your business continuing to operate (your car), and you leave yourself unable to take the time off you need when you need it. Don’t put yourself in that spot.