It’s the buzzword on many a lip: the gig economy is on the rise as more and more trade their rigid, full-time jobs for flexibility, freedom and the ability to work on projects that excite them.
Once thought of as a shift in work behaviour unique to millennials, statistics show that workers in the gig economy are all ages and come from a variety of different backgrounds as work-life balance becomes increasingly important to the average worker.
In fact, according to the Australian Bureau of Statistics, approximately 2.5 million Australians are currently employed on a casual basis, which can be said to encompass freelance and gig workers. That means that approximately a quarter of the workforce are gig workers, a rise of approximately 13 per cent from the 1990s.
But while many agree that the gig economy has definite benefits for those seeking a greater balance between their professional and personal lives, the gig economy also comes with a few downsides. These include a constantly fluctuating income, job insecurity, lack of retirement savings and the absence of any personal protection if something were to prevent you from working.
But these downsides don’t have to mean you’re left behind when it comes to achieving financial success. There are a number of ways you can embrace flexibility in your working life while still striving to achieve a brighter financial future.
The keys to success? Organisation, and professional help and guidance.
And these tips for achieving financial success in the gig economy, straight from those financial professionals we mentioned before:
1 – Create A Safety Net That Is Accessible
As a worker in the gig economy, it’s likely that you’ll never know exactly where your next paycheque is coming from or how much money it will contain. That’s why creating and maintaining a financial safety net that you can easily access in times of need becomes so important in order to achieve financial success.
Having a reserve of cash on hand in times when work is slow or a payment you were relying on is delayed ensures that you won’t be forced to turn to a credit card or loan to supplement your income. Alternatively, if you’d like to make your cash work a little harder for you while maintaining access to it, you could put a portion of your reserve into short-term investments, such as a high-interest savings account.
But before you can begin creating a financial safety net, it’s important to first make your cash flow as steady as possible so you can gain a better idea of your financial world.
While a unstable cash flow is often touted as a major downside of the gig economy, there are ways to help regulate your cash flow. These methods include negotiating with clients ahead of time a deposit which will ensure you’re able to rely on a minimum flow of cash. Once you have an understanding of the minimum amount of money you can expect in any given month, it becomes easier to set aside a portion of it, even it’s only small, for a rainy day.
2 – Don’t Forget About Your Retirement
For workers in the gig economy, thinking about and planning for retirement is something that usually falls to the bottom of the priority list as life gets in the way. But while full-time workers are able to enjoy a certain amount of retirement security through their employer’s contributions to their superannuation fund, freelance and temp workers don’t have this option. As a freelance worker, ensuring that you’re able to achieve your dream retirement depends entirely on you. While it might not seem important at the moment as you focus on finding your next gig, planning ahead for when your work is done is vital to achieving financial success.
Superannuation is one of the biggest investments that many Australians will make in their lifetime and being active in regularly making contributions to it will play a major part in whether you’ll be able to enjoy the retirement you want. As a freelance worker, the responsibility of making these contributions falls entirely on you and as such should be factored into your overall financial strategy. Or, if you’re feeling overwhelmed by the idea of planning for your retirement on top of everything else you may be juggling, seek the advice of a financial professional to make it easier.
Managing your financial world alone can feel liberating, but having a team you trust by your side can ensure that your financial world is taken care of without you having to be involved in every tiny detail.
3 – Build A Team You Trust
It’s no secret that your financial world can be complicated, depending on your personal financial circumstances and type of work. Participating in the gig economy or being a freelance worker can make your financial world even more challenging. Building a team of financial professionals, including a financial advisor in particular, is essential to ensuring every aspect of your financial world is taken care of while simplifying your to-do list.
Your financial world covers many different aspects including:
- Planning for retirement
- Cash flow and budgeting
- Tax and accounting
- Estate planning
Having a comprehensive financial plan, and a dedicated financial advisor, ensures that you’ll have a realistic path towards achieving your financial goals, no matter what life may throw at you. But just like it’s important to find the right dentist or doctor, it’s important to find a financial advisor that considers your entire financial world and goals before making any recommendations.
The right financial advisor should consider your unique financial circumstances and create financial strategies that reflect your particular needs and investment risk tolerance. And that’s all in addition to providing you with financial guidance and support whenever and wherever you need it.
4 – Think Like A Business Owner
While it might seem like an obvious suggestion, one of the keys to achieving financial success in the gig economy is to think of yourself as a business and plan accordingly. That means getting into the habit of keeping yourself accountable for your expenses and making decisions in a strategic way that will help you to grow in the future.
It also means taking the time to sit down and create a business plan which, alongside your financial plan, will help guide you on your journey to financial success. A business plan may cover:
- How you plan to obtain income
- Your areas of expertise
- Your service offerings
- Your fees and expenses
This plan will help you to have a more solid grasp over your current financial world and where you’d like to be in the future, as well as informing the path you take to get there.
5 – Invest For The Long Term
For workers in the gig economy with a reduced stable cash flow, it’s likely that the investment option suited to your financial circumstances is shares. But when it comes to investing in shares, many are worried by the often volatile fluctuations in the share market. At My Wealth Solutions we believe that a successful investment strategy is one that is as diverse as possible and is undertaken for the long term, as this type of investment portfolio is most likely to be able to weather the inevitable fluctuations in the stock market.
Luckily, this is also the type of investment strategy that is most suited to gig workers. A long-term investment strategy allows you to take steps to build and deliver wealth steadily over many years, rather than trying to grow your cash quickly by exposing yourself to unnecessary risk. This is especially important for those of you supporting a family while balancing gig work, as your long-term investments will be able to help you meet your family’s future needs as your wealth growths.
6 – Assert What Your Time Is Worth
Freelancers and gig workers often have trouble defining a suitable price for their services and, as a result, may end up settling for a smaller amount of compensation than they should. This is not only not fair, but also may result in further challenges on your journey to financial success.
If you haven’t already, set down clearly how long each task you may do for a client could take and what the fair monetary compensation for that amount of time is. Then, incorporate this rate into your business plan so you can charge your clients a price that is fair while ensuring you are earning a living wage. Once you have this rate set in place, you’re better prepared to achieve a more secure financial future.
7 – Diversify Your income
While this may come naturally the further you delve into the gig economy, for freelance and casual workers diversifying your income becomes essential to achieving financial success. As the nature of work in the gig economy is temporary, diversifying your income as much as possible is important to ensure you’re able to keep your financial and business plan on track.
But diversifying your income isn’t just about taking on jobs from multiple companies, it’s also just as important to spread your income streams across multiple industries if possible. This way, you’re better prepared financially in case something were to happen outside of your control that could cause a particular industry to experience a rough patch. Plus, working across multiple industries will allow you a greater breadth of experience, which in turn may become a selling point for attracting future clients.
8 – Protect Yourself
For self-employed workers in the gig economy, injuring yourself or having something else happen that may prevent you from working can have a devastating effect on both you and your family. While regular employees who are injured at work are able to claim on workers’ compensation protection and may have access to long-term disability coverage through their employer, gig workers have to take out their own policies to protect themselves in case the worst happens.
As someone who is self-employed, the wording of your personal protection policy becomes much more important than for those who are employed full-time. For example, some personal protection policies require you to completely stop work for a period of time before you’re able to access the benefits of this policy, which can be nearly impossible for those in the gig economy trying to keep their head above water. This is where your financial advisor can help, by helping you see through the fineprint to find the right personal protection policy for you.
Your financial advisor can also help you design and implement a personal protection strategy that takes into account the characteristics and risks of your particular financial situation. This strategy should ensure that if something were to happen that prevented you from working, you and your loved ones would still have access to a regular income. With a personal protection plan in place, you can focus on your work with the comfort that comes from knowing that you’ll be taken care of financially no matter what challenge comes your way,
9 – Get Organised
As a gig worker, you’ll likely be receiving income from a variety of different companies and individuals, making your income stream more complicated than full-time workers. And when you’re juggling so many different aspects of your financial world at once, it’s easy for things that may be essential to your financial success to fall through the cracks. That’s why financial organisation is a key to success as it prevents all those minor financial tasks you may ignore from becoming one massive financial headache.
Tax time as a gig worker is just one example of where not organising your financial world can make managing it challenging. Luckily, once you have a financial team in place, you won’t have to tackle organising your financial world alone. Your financial advisor can help you keep track of your income and expenses, as well as keep you accountable for your record-keeping.
10 – Don’t Wait To Get Started
We know that life can get in the way of even the best financial intentions, especially as your attention is divided across multiple projects. But good intentions can easily remain just that – unless you take action to start creating a path towards financial success.
That’s right, there’s never been a better time to put these ideas into action and ensure that you’re making the most of your hard work to build a brighter financial future.
Just like it can complicate other aspects of your life, the gig economy can make successfully managing your financial world challenging. But you don’t have to do it alone.
Your dedicated financial advisor is here to help provide clarity and guidance as they work together with you to provide a practical path from where you are now to where you want to go. Participating in the gig economy doesn’t have to mean being a step behind full-time workers, your financial advisor can help you achieve financial success with confidence.