Working in the gig economy offers some great perks. For starters, you get the flexibility of setting your own hours. Plus, you can often find gigs instantly using an app rather than prospecting new work yourself.
Nearly one in four Americans have earned money in the gig or “platform economy” over the last year, according to Pew Research Center. Some pick up side jobs for extra cash to pad their savings accounts. Others earn a full-time income working multiple gigs. Yet, while the flexibility of working when you want is certainly appealing, a side hustle doesn’t result in a steady paycheck arriving in your bank account every two weeks. And, this inconsistent income stream can make it harder to reach your money goals.
Here are 4 tips to help you take advantage of the gig economy while still achieving your financial goals.
Track Your Cash Flow with a Budget
Having a budget is one of the fundamentals of personal finance. And, when you work in the gig economy with an irregular income, it’s even more important to create a budget to better track your cash flow.
First off, figure out how much money you have coming in each month. From there, compile all of your monthly expenses. This will help you understand how much money you need to cover your monthly nut. By tracking your money and spending habits, you’ll be able to get a snapshot look at where your cash is going and find areas where you may be able to cut back. For instance, maybe you spend a little too much on fast food or entertainment. Yet, once you see this clearly, you can opt to cut down on the number of times you eat out on Taco Tuesday.
Set Savings Goals
Saving money for multiple goals can feel like an insurmountable task, Yet, with a little know-how and planning, you can do it!
The first savings goal you should have is to build an emergency fund. An emergency fund is a savings fund that should be used only to pay for unexpected expenses and well, emergencies. Experts recommend saving three to six months worth of expenses in a rainy day fund and it’s never too late to start one. If you work in the gig economy, an emergency fund may come in particularly handy. For example, if you go through a dry spell and jobs are scarce, you may need to tap into your emergency fund to help cover your monthly expenses during this time of low employment.
In addition to an emergency fund, this is a good time to start boosting your regular savings account by automating. If you’re a Chime member, for example, you can enroll in the Automatic Savings Program to save money with every single debit card transaction. Every time you make a purchase using your card, Chime rounds up that amount to the nearest dollar and then deposits that round-up amount into your Savings account.
Grow Your Money Through Investing
Many companies offer their employees a company-sponsored 401(k) plan to save for retirement. If your employer offers a 401(k), you should definitely take advantage of this benefit. But, if you are your own boss working in the gig economy, you may not have the option of a 401(k). No worries; there are other ways to save for retirement.
Self-employed and independent contractors can save for retirement by opening up various types of individual retirement accounts (IRAs). Do your homework to figure out the best IRA option for you.
Keep in mind that you probably won’t want to work forever. Saving for your retirement starting right now will help you grow your wealth – allowing you to relax in your golden years.
Be Prepared for Taxes
Although it’s exciting when you start getting paid for your gig work, it’s important to remember that you still have to set some money aside to pay taxes on your earnings.
Yup. When you’re the boss, no one automatically deducts taxes from your paycheck. How much will you need to pay? There is no one answer to this question. So for this reason, you’ll need to do your research to figure out the right amount. To help you get into the practice of setting money aside, try automating your savings. If you sign up for a Chime account, you can automatically direct 10% of every paycheck into your savings account as soon as you get paid.
Indeed, putting money away with every paycheck will save you a lot of stress come tax time.
As we move into a new year, there’s no time like the present to investigate new ways to earn money or grow your wealth. With a little planning and foresight, you can be on your way to successfully work in the gig economy and reaching your financial goals.