The gig economy has become one of the latest trends in the job market. As opposed to traditional, full-time work, the gig economy is focused on taking on different jobs on a task-by-task basis. These gigs are usually paid for by clientele looking for someone to handle specific, one-time jobs. Some of the most common examples of gig jobs are freelance photographers, ridesharing and food delivery, freelance programmers, and more.
While the gig economy gives those working in it a lot of flexibility and self-ownership to choose their work, the biggest hurdles that arise are typically related to money management. Gig work does not come with the financial and job security that is common for full-time work. Therefore, gig workers need to be aware of all the ways they can manage their income in order to prepare for times when gig opportunities are low, and ensure financial security for the future.
Read on for some income management strategies that will help you build a strong financial foundation in the gig economy.
Make Tech Your Best Friend
Technology is becoming integrated into people’s lives in a variety of ways, and in fact, may be one of the reasons for the growth of the gig economy in the first place, due to the many marketing and networking opportunities it created. There are a lot of great options for technology that can help you manage all the financial aspects of your gig work, and they should definitely be taken advantage of.
One way that technology is being used by gig workers is with financial technology. Many people are now looking towards online-only banks in order to have easy access to their financial information from their smartphones. They also enjoy the fact that they can get instant updates whenever they make a transaction. Plus, online banking is often cheaper than traditional banking, giving users the opportunity to save more money in the long run.
There are also budgeting apps available that allow you to limit your expenses and keep an eye on your monthly spending. These apps work by connecting directly with your bank account to track your purchases and organize them by category. This way, you can get an idea of where most of your spending is going, and find out where you need to cut back in order to meet your monthly spending goals.
Finally, gig workers can use platforms such as Moonlighting and CareerGig in order to find more work and market their business. These platforms will post job openings and give gig workers the opportunity to search for the right opportunities. They also help manage payments and allow you to create a personal business page to better market your skillset and sell yourself and your services.
Getting a handle on your finances as a gig worker is a little bit different than if you were working full-time. With full-time work, the company you work for will usually provide you with important financial documents such as W2s and other tax info. However, since you’ll be self-employed as a gig worker, you’ll have to record your information differently. This includes tracking both your income and any business-related expenses.
Tracking your income will involve keeping invoices of every client you work with in order to make sure that you’re getting paid on time, and that you have a record of that payment for tax purposes. All income from your business is legally required to be reported to the IRS on your 1040 tax form each year. (For more information, see the IRS page on gig work.) This is going to serve in place of a W2 and it’s why it’s important to save all necessary income files in a safe location.
If you spend any money on business-related expenses, such as transportation, a home office, or equipment, you may be eligible to write them off on your taxes. In order to get these benefits, you should always keep receipts from business spending and have them stored away in a filing cabinet.
It’s also considered a good idea to keep your gig income and expenses in a separate bank account from your personal finances. Having your business and personal finances in the same account can often cause confusion and make tax filing and other financial paperwork more difficult. Keeping everything separate and organized allows for much easier money management.
Save For Emergencies
Working gigs is often less consistent than full-time work. Therefore, there may be times where you are taking on fewer jobs than you would normally want to. This can be especially problematic when you have major bills and expenses to pay for each month. In order to cover for those times when you might not have as much work, you should look into building an emergency savings fund.
Emergency funds are reserves of cash that are meant to cover roughly three to six months’ worth of expenses in case you run into long periods of time without work. These take some time to get off the ground, but with the right amount of preparation, you should be able to save enough. Generally, you can get one started by taking a small percentage of each of your paychecks and putting it into a safe savings account, one that you’ll only withdraw from when money is tight.
Have a Backup Gig
Having another gig to fall back on can be a great way to cover any expenses you might run into during slower periods. Ideally, fall back gigs should be something you can consistently get work doing, such as ridesharing or food delivery. These jobs are a bit more consistent, and you can generally get started on them quickly through services like Uber or Doordash.
You can also take on a second, part-time job. While this is going to give you a bit less flexibility than other gig jobs, having a part-time job on the side of your gig work is a reliable fall back, still allowing you a bit of control over when you work. They’re also a bit more consistent in terms of when you get paid, giving you a steady source of income in any situation where your gig work isn’t earning enough.
Your finances are going to be an important part of your career in the gig economy. With the right amount of planning, record keeping, and backup plans, you’ll be on a great track to staying afloat and having a fulfilling career.