How to budget smartly when you’re a gig-employed worker or self-employed?

The gig economy has completely transformed the lives of millions of Americans who work and earn today. According to Small Business Labs reports, around 59 million Americans took up gig jobs in 2021.

While gig jobs offer benefits such as flexible pay and hours, it also has a significant drawback that there is no fixed income. This makes it difficult for gig workers to plan their budgets effectively. Therefore, it is essential to have a well-defined budget plan keeping in mind your fluctuating income. 

How to manage your budget smartly if you are a Gig Worker?

A gig worker neither has a predictable income nor gets the perk of an employee. Hence, a gig worker who solely depends on the job might find it challenging to meet both ends. A solid financial budget will no doubt be helpful, but sometimes gig workers must take gig worker loans to meet these ends. Hence, planning the budget is essential. Therefore, read these five tips to budget smartly if you are a Gig Worker: 

1. Calculate your average monthly income and expenses

To plan a budget, you need to know your monthly income and expenses. However, this can be challenging as gig jobs do not guarantee a fixed income every month.

Therefore, you must make a list of your monthly expenses, including all your living expenses like transportation, housing, groceries, utilities, groceries, debt payments, health insurance, and tax payments, depending on the type of your gig work. 

Now, calculate your income. You should have an income history if the gig job exceeds a month. From this income history, you can deduce your lowest monthly earnings, and then you can accordingly plan your expenses. If you have recently started gig work, you need to be even more careful while calculating your income. You must identify your average monthly income and expenses and prepare a successful budget.

2. Adopt measures to cut expenses

Remember, a penny saved is a penny earned. Therefore, to save money, you should adopt cost-cutting measures like:

• Lower your expenses to the bare minimum. Avoid eating out too much or buying unnecessary items. 
• Try to save on your shopping expenses by buying commodities at discounted prices.
• Reduce your electricity usage.  
• Try to walk, cycle or use public transport more. 

3. Plan to save for taxes

Unlike regular jobs, you do not have to pay social security, federal income, or medicare tax. Despite that, you do need to file and pay taxes like any other regular employee. Hence, you need to include ‘savings for taxes’ as an expense category in your budget so that you do not feel pressured while paying taxes at the end of the year. 

You can also file for quarterly taxes. It allows you to pay your taxes four times a year instead of a lump sum at the end of the financial year.  

4. Build your emergency savings fund

Not only can your income fluctuate, but unexpected expenses such as hefty medical bills can arise anytime. To cope with such financially challenging times, you must set aside at least three months’ worth of expenses as an emergency fund in a savings account. It will ensure you have enough money to cover the costs for the next couple of months. In addition to this, the habit of saving is always beneficial. 

5. Remember to save for retirement

While traditional jobs offer a retirement plan to their employees, gig workers don’t get to enjoy such benefits. This means that you have to arrange funds for your post-retirement days. Therefore, you must open an individual retirement account(IRA) and try to save at least 10% – 15% of your income. Make sure to set up automated transfers. This way, you can save a decent amount to meet your post-retirement expenses. 

To wind-up

Who said you couldn’t have a stable financial life with fluctuating paychecks? Although budgeting is not a cakewalk for gig workers, this doesn’t mean you can’t have a monthly budget. To successfully ride the fluctuations that are a part of the gig world, you need to understand your income and expenses clearly and then chalk an intelligent budget for yourself. 

Since budgets are personal, the best method for another person might not work for you. Hence, it would help if you devised a budget plan that suits your financial situation and tweaked it when required while enjoying the benefits of your gig job.