Buckle up! The economy is always evolving, but lately, it seems like a roller coaster ride. With a projected value of more than $455 billion annually in the U.S., gig workers make up a growing segment of the modern economy.¹
Thinking of ditching the 9-to-5 grind for the freelance frenzy? Before you leap in with both feet, let’s talk about managing your money as a gig worker or freelancer. Here are some steps to confidently navigate your finances in the gig economy.
Track your income consistently
The first step for freelancers and gig workers to manage their finances is to track their income closely.
Consider opening a dedicated account just for your business. Even if you don’t, track exactly how much you’re earning.
Helpful tools for income tracking include:
- Spreadsheets (Excel or Google Sheets, for example)
- Budgeting apps
- Accounting software
Knowing how much you’re earning helps you budget and manage your taxes. You can’t make an informed freelancer financial plan unless you know how much you bring in monthly.
Budget effectively for irregular income
Unlike a steady day job, freelancers and gig workers have irregular incomes. You’ll make more in some months and less in some months. That makes your budget even more crucial.
As you build out your budget, pay close attention to fixed expenses like mortgage or rent, loan payments, insurance, and utilities. Keep non-essential spending low so you don’t run into trouble during months with below-average income. A flexible budget will help you get you through slower seasons.
Save for taxes and healthcare
Unlike when you work for a full-time employer with health benefits, you have to handle taxes and healthcare on your own when you’re a freelancer or gig worker. Savvy freelancers put away about a quarter of their earnings for taxes, which must be paid quarterly to the IRS.²
Health insurance can be expensive for self-employed individuals. While the Affordable Care Act ensures everyone has access to health plans, you may have to pay a high premium every month plus additional costs when you need care.
Build an emergency fund
Large expenses can arise at any time. From surprise car repairs to unexpected medical bills, be prepared when unexpected expenses arise.
While those with a steady income are often fine with three months of expenses in an emergency fund, workers with variable income can aim to double that to six months of expenses in a savings account.³
If you don’t have one already, it’s never too late to start saving. Turning on automated savings of just $5 or $10 per week is a great way to start. You can grow the amount you save over time. And if you keep your cash in a high-yield savings account, your money may grow every month.
Make the most of your money in the gig economy
Whether you’re doing gig work as a part-time side hustle or as a full-time job, managing your finances well is part of the formula for success. When you manage your money well and grow your business, you can put yourself on track to a wonderful career in the gig economy.