Financial Tips for Working in the Gig Economy

November 24, 2022

The gig economy is a system in which companies prefer not to hire full-time employees, but to attract independent contractors and freelancers, often not full-time. Such an organization of work has advantages for both the employee and the employer. A freelancer in the gig economy can choose an employer and determine the amount of work, schedule, and place of work. The employer saves significantly: he pays only for working hours. In addition, he is exempt from social guarantees due to being a full-time employee. The lack of a stable income often leads to unplanned spending and holes in the budget. Therefore, loans for gig workers often become the only salvation.

The fears that the gig economy raises are related to the fact that by choosing this type of employment, gig workers are deprived of many of the benefits and guarantees enshrined in labor law: sick leave, insurance, maternity leave, paid overtime, minimum wage, etc. At the same time, performers sometimes have to work long hours without a break for little money.

If you happen to be one of the representatives of the gig economy or you are just planning to start on this path. It will be helpful for you to learn how to properly allocate your funds and ensure that work brings pleasure and income. And life has not turned into an endless economy.

Create a Budget

Unfortunately, it cannot be easy to fully calculate your finances in the gig economy, as income can vary significantly from month to month. First, however, you need to create your monthly budget and include mandatory spending that occurs monthly and that you cannot control.

Calculate how much money you spend on paying regular bills and mortgage payments. How much, on average, do you spend on living expenses and transportation? If you have a child in your family, consider school and seasonal expenses like buying new clothes.

Please take it as seriously as possible and spend enough time thinking through every little thing. Allocate a certain amount for recreation during the holidays – for gifts and organizing a party. Creating a budget isn’t always about sadly counting bills and saving on every little thing. It’s about smart planning to get more in the end.

A pre-formed budget will help you avoid unnecessary spending and show you how much money you need to earn for a comfortable life.

Save Money on a Separate Account

It does not have to be a whole savings account for your emergency fund. You can save money in a piggy bank or keep it under your pillow. The main thing is to set aside some part of your earnings every month, thereby creating a safety cushion for yourself. 

Financial experts recommend setting aside 10 to 15 percent of your earnings to the savings account each month, so you can always provide yourself with financial help from the emergency fund if you need it.

However, if you haven’t set aside enough money yet, or if unexpected expenses caught you off guard, you can always consider loans for gig workers. With the right approach, those personal loans for gig workers may help bring your business to a new level or improve your credit score. 

This type of loan can be approved without a credit check, which is especially important if your credit score is not high enough right now. A cash advance will be available on the same day or the next business day.

Don’t Forget About Taxes

In the case of formal employment, tax issues are always dealt with by “someone else.” However, if you are part of the gig economy, then the issue of taxes lies on your shoulders. You are responsible for paying your own taxes, including social security and Medicare tax, which employers normally pay. 

If you are not one hundred percent sure how to correctly calculate and pay taxes in your case, you should seek the help of a financial advisor or a reliable partner who is well-versed in this matter. So he can do the calculations for you and make sure that you are doing everything right. Improper payment of taxes can create significant problems in the future, so this is a very important point for gig workers. 

Save for Retirement

As with taxes, retirement planning is your responsibility if you are self-employed. However, as a freelancer, you still have several retirement plan options, including Roth 401k, individual 401k, Roth IRA, or Traditional IRAs. We also recommend that you seek help or advice from a financial expert who can help you choose the best retirement account option for you. 

Ideally, you will need to set up a monthly deduction from your account to your retirement account. If the whole process is set up automatically, you only need to ensure that your bank account always has the necessary amount for deductions. Given that gig workers’ income will not be regular, you should not forget this.

Take Care of Health Insurance

Even if, at first glance, self-payment of insurance seems like too much cash, you should think about it. Unfortunately, each of us, from time to time, turns to the doctor. It’s one of those things that we can’t control and can’t influence. And while paying a monthly insurance premium may seem like an unnecessary expense, unexpected medical bills can hurt your pocket a lot more. Depending on the type of business you are in, you may benefit from different types of insurance. Consider your professional activities when choosing a package.

Of course, everything is individual, and the choice is always yours, but if your income allows you to allocate a certain amount for this, do not neglect health insurance or a health savings account.

Plan for the Future

You want to make God laugh, tell him your plans, right? In matters of gig finance, any planning becomes even more difficult. Nevertheless, in order to successfully develop in the chosen direction and make the next year better than the previous one, try to plan not only for a month but also for the year ahead. 

Think about what you could do to make even more money next year. It can be little things at first glance that will significantly improve your income. For example, if you are in the transportation business, improve your customer service skills. Do you work in delivery? Think about the speed of movement. If you’re DIY, try thinking about new products, better materials, advertising, or building your own brand. Freelance work? There may be a lot of options, but planning always helps to improve quality.

And don’t forget to dream. Creativity is thriving in the gig economy, and you can achieve a lot with it. Gig worker, among other things, has more freedom. Therefore, create and dream, but do not forget that rationalizing the financial part will help keep you on your nerves and increase your income. We hope that our financial tips for working in the gig economy will help you organize your budget and make it easier.


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