Maintaining financial wellness for independent contractors in the Gig Economy – both in the short term, such as living within one’s own limits and saving for goals and the long term, including mitigating against risk.
to be concerned about financial wellness is to keep track of income and expenditures, to save a certain amount of money, to pay taxes by the deadlines, keeping debt in check, and planning for future years/decades.Apps that promote automation of savings could help in mobile education.
Create a Budget
Maintaining financial wellbeing includes becoming a master at monetary management (of course, for those working on a fluctuating paycheck, this can be especially difficult). Budgeting, building an emergency fund or saving for a rainy day, and better understanding tax liabilities are the key priorities of many independent contractors. Due to their lacking ability to meaningfully improve their positions, education on obtaining the skills to break this cycle of dependence through realistic tools may assist in overcoming this adversity. Gig workers would benefit from keeping track of all income sources and expenses (using budgeting apps like Quicken or simple spreadsheets with columns for dates, amounts, descriptions of the income sources and expenses) so they can have an accurate picture of their finances, and determine what they need to cut back on in their spending in order to achieve their financial goals most effectively. To start with, gig workers need to build an emergency funds that cover three to six months of living expenses, an insurance against the next major unplanned expense (or a slow season). It’s also important for them to try to get health insurance either through the marketplaces, or through professional organisations. And secondly, create a retirement account, either through an IRA or a solo 401(k).
Establish an Emergency Fund
Although this arrangement offers gig workers more autonomy and flexibility over their work lives, most gig employment models carry greater risk of financial unpredictability: without employer-provided tax deductions, pensions or retirement savings plans, gig workers must set aside and manage their own taxes, insurances and savings accounts. It’s almost impossible to create an emergency fund, given that incomes can come in clumps in a given month.We’d hope that, once people have an emergency fund equal to three to six times their monthly expenses, they’re well-positioned. But maybe that’s not a good gig workers’ plan. Companies should make gig workers eligible for the same types of financial wellness benefits offered to full-time workers, like training on retirement savings, budgeting or debt and credit-management.
Manage Cash Flow Efficiently
In order to be financially successful, independent contractors in the gig economy are advised to practice financial wellness by working on their budgeting, setting up an emergency savings fund, diversifying streams of income, planning for retirement, and managing debt, along with continuously investing in developing their personal brand and skills. They also need to learn to master job-related taxes, insurance and looking out for many more marketing opportunities for their work. Specific to the gig economy are financial hurdles like volatile and unpredictable income, self-employment tax and the lack of a job’s benefits. Approaching the challenges with a sound strategy will allow gig workers to transition into financial health more efficiently. Do so by recording expenditures via a bookkeeping app (like Mint or YNAB) or a spreadsheet. Keep liquidity at hand in order to cover expenses – earned wage access accounts on your gig platform of choice can make this easy; this way you’ll be ready to cover them before biweekly payout cycles start rolling in. And set aside funds for taxes, federal, state and local in nature. Do consult with a tax adviser to ensure an optimal fiscal outcome.
Create a Support System
But perhaps most importantly of all, a support network – made up of family, friends and coworkers that provide the workers with emotional or professional support and advice, and encourage them – is key, especially for those who have multiple jobs or are unable to fit in a regular work schedule. Support networks could also be websites or forums where people who have similar experiences interact. In a gig economy in which so many workers lack the benefits packages of the past, it’s imperative that they know how to manage well on their own. Providing the tools that are needed to live on a budget and build up an emergency fund and savings for future goals is a good place to begin. Companies can get ahead of the game by providing digital tools that make it easy for people to accomplish their financial wellness goals – for example, budgeting and savings apps and financial advice and discounts through marketplaces. If companies offer solutions that cater to gig economy workers’ specific needs, I believe they can drive true value for gig-economy workers, as well as help start to break out of the paycheque-to-paycheque cycle.
