Making extra cash from a side hustle can be a brilliant way of improving your finances quickly – and doing work of your choosing. Depending on your time availability and your side gig of choice, it can also be fairly lucrative: The average Millennial reports earning nearly $1,000 per month from their side gigs, according to a study by SunTrust Bank. That's quite a bit of extra cash that can be put to good use. Here's how to formulate a plan for your extra income.

Determine Your Priorities

Starting a side gig implies working more hours, and re-arranging your schedule to accommodate the extra work. This can obviously impact your ability to enjoy leisure activities, time with friends and family, and your energy levels.

Calvin Williams Jr, CEO and founder of Freeman Capital suggests that the first step in creating a plan is assessing the type of lifestyle you want.

"Each side hustle requires a different level of involvement. Do you want this lifestyle change? The first step is to really assess the quality of life that you want to have, and whether your side gig is compatible with it."

Williams advises considering a variety of side gigs, as each may require different levels of effort and reward that may be more or less compatible with your earnings priorities and lifestyle. A side gig that requires too much effort may lead to early burn-out if the rewards aren't commensurate, for example.

The next important priority to clarify, says Williams, is why you want the extra money.

"Are you just looking for more cash flow, or trying to increase net worth, such as paying off debt or building savings. Answering these questions allow you to approach the next steps."

Investing in Yourself

The extra income you generate is best used as an investment in yourself, in three key ways: By improving your net worth, improving your employability, or increasing your income long-term. If you have debt – especially high-interest debt, such as credit cards – Williams suggests tackling this first.

"TheNo. 1 way to invest in yourself is to get your debt into control. Consider these two key tips: First, consider the snowball method, starting with paying off the smallest debts, and building from there. Or, try the debt avalanche, paying off high-interest debt first. Either way, the goal is to get control over your debt quickly using your side gig."

But you can also think of your side gig as a way to make yourself more employable. Depending on your gig of choice, you might acquire new skills that are transferable to traditional jobs or your existing 9-5, such as learning how to market your business or use new technologies. In other cases, a side gig can provide the money to acquire new credentials.

"You can leverage side hustle income to build greater value for your family: What certifications, or other education can you get to help you with your 9-5 W2 job? You can use your side hustle income to invest in yourself, with new degrees or certificates,  and increase your primary career income, " says Williams.

More from Invest in You:
The ultimate side hustle guide for 2021
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Once you have your side hustle up and running, don't forget the benefits at your 9-5 job. Now that you have more income, increase your 401k contributions – to the maximum, if possible, and certainly at least the amount required to get a full employer match. Also, be sure to take advantage of HSA or FSA contributions, as these will also lower your AGI for tax purposes. And having solid health, AD&D, and life insurance in place can protect you more completely if you can now afford to contribute to better plans thanks to your side income.

Finally, Williams suggests leveraging your extra income stream to produce assets that can generate income for you – that is, converting this new cash flow into assets.  That could mean anything from starting a brokerage account to investing in real estate or lending platforms. The idea is to ensure your extra income keeps generating money for you over the long-term. Williams suggests that this is especially important for families of color, who historically have enjoyed less wealth and fewer opportunities for wealth creation.

"There is a racial gap in wealth and income disparity in this country. I personally believe that having side hustle income can help families of color build wealth to help close that gap."

Finally, remember that a side hustle is a real business, and should be treated as such. To make tax time easier, consider keeping a separate bank account for your side income, for example. If you use a phone for your business, or incur gas and mileage costs on your vehicle, these costs can be deducted as business expenses. Ditto for a home office. As your overall income and wealth grow, it may be time to spring for professional accounting or financial advisor service to help you make the best possible choices, suggests Williams.

"Treat your side gig like a real business, and invest in those things that will make it grow."

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.