Diverse opportunities await “gig” workers who seek the flexibility of working anytime, anywhere to remain in control of their work-life balance. This promise of freedom and flexibility has its unique challenges as the model of contract-based, short-term engagements is in stark contrast to the job security, monthly salaries, and health and retirement benefits that traditional employment offers.
Financial volatility is a defining feature of the “gig economy”, and managing an unpredictable income has its fair share of challenges. With freelancing being the potential future of work, Millennials and Gen Z must develop strong financial strategies to navigate the challenges and make the most of the opportunities.
With freelancing comes a variable income stream – which means that budget is key to achieving financial stability. Budgeting based on your worst earning month is ideal.
Fixed expenses (i.e. rent, utilities, loans, insurance, and other debt payments) + variable expenses (groceries, transportation, meal plans, hobbies, and entertainment) = Remaining amount (ideally, should be allocated to savings and/or investments).
Another way to follow the 50, 30, 20 method. This means that during peak and low-income periods, you can scale spending according to your income.
Freelance worker or not, an emergency fund is a must-have. Aim to save three to six months' worth of living expenses which can be your safety net during periods of low income or when unexpected expenses arise. Having a separate bank account can help manage, track, and maintain.
For greater stability and to reduce financial risk, diversify your income streams. Pick up additional “side gigs” that complement your primary work, explore passive income opportunities, or seek out long-term contracts and retainer agreements to ease you through the lean months – This could also lead to new opportunities for growth and learning.
Make use of financial tools and apps to help you track your spending and stay within your budget. Track earnings from every job with an income-tracking app; use invoicing and accounting software to streamline financial management.
The “gig economy” is dynamic, constantly shifting and evolving. To thrive in this landscape, simply keeping up isn't enough – you need to stay ahead of the curve. Look at investing in ongoing education, certifications, and the tools of your trade to help boost your career growth. Regular contributions, however small, can compound over time and help build financial security in your later years.
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