Gig workers face income fluctuations and overhead expenses that regular employees do not. Let’s look at 7 ways gig workers can budget smart.
If you’re a gig worker, keeping track of finances can be especially challenging. Your budget may fluctuate significantly from one month to the next, and you’re responsible for all the overhead associated with getting your work done. Here we outline 7 ways gig workers can budget smart, avoid financial binds, and prepare for a bright financial future.
Make a list of all of your monthly expenses, including personal living expenses such as housing, utilities, transportation, health insurance, groceries, and other bills, and work expenses such as software subscription fees and office supplies.
Note that some of your expenses may be paid annually, so be sure to divide those amounts by 12 in order to factor them into your monthly budget. If you are like most gig workers, taxes aren’t taken out of your pay before it reaches you, which means you should also include estimated taxes in your list of expenses.
After adding up expenses, add up how much you earn each month on average. Ideally the amount you earn should be greater than or equal to your average monthly expenses. If not, then you will need to pay special attention to the next tip.
Even if you earn more on average than you spend, it’s a good idea to find places to cut costs. After all, a penny saved is a penny earned. Cost-cutting strategies include:
As a gig worker, many of the things you spend money on in the course of working are tax deductible. Keep track of these expenses throughout the year and save receipts to avoid headaches at tax time. Tax deductible expenses may include:
Unlike those who work a regular job, gig workers are typically responsible for paying their own taxes. The IRS has a form 1040-ES you can complete to estimate how much you will owe for the year. You should divide your total tax burden by four and plan on paying your estimated taxes in four installments.
The due dates for estimated payments are typically April 15, June 15, September 15, and January 15 of the following year. Be sure to visit your state’s Department of Revenue website as well to find out how much you may owe in state taxes and how to pay.
Stay on track with your financial goals with Bright.
Because your income may fluctuate wildly, it can ease financial stress if you stay at least a month ahead on all of your bills. This ensures you have the cushion you need to get through slow months.
Not only may your income fluctuate, but unforeseen expenses such as a large medical bill or a major home repair, like a broken water heater, can arise at any time. A good rule of thumb is to set aside three months worth of expenses in a savings account that you can tap into should an emergency arise. These funds may also come in handy if you have a string of dry months.
Because of compound interest, the more you can save earlier in life, the more you will have when it comes time to stop working. Consider opening an individual retirement account (IRA) and setting aside 10 to 15 percent of your monthly income, if possible.
Bright can help you ride the fluctuations that come with gig work. With a personalized Bright Plan, we’ll study your income and spending habits, build a personalized budget for smarter planning, and move funds and make card payments for you every month, finding the fastest, smartest way to get you debt-free and build more savings. Bright adjusts automatically as your finances shift, and keeps you on track through thick and thin.
Download the Bright app from the App Store or Google Play, connect your bank and your cards, set your goals, and let Bright get to work.
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.