How to be financially secure as a gig worker

How to be financially secure as a gig worker

Gig work has become a popular alternative to traditional employment, offering people more flexibility, freedom, and the opportunity to pursue their goals on their own terms. But is it right for you?

To help you decide, we'll explore some factors you should think about when considering gig work and discuss strategies for achieving financial security as a gig worker.

First, what is gig work? 

Gig work, or the gig economy, refers to temporary or flexible jobs often performed by independent contractors or self-employed individuals. Unlike the traditional 9-to-5 job, gig work allows people to work on a project-by-project basis, providing services to clients or companies without the commitment of long-term contracts. The rise of gig work has been driven by various technological advancements, making it easier for individuals to connect with potential clients through online platforms.

Gig work encompasses a range of professions, allowing people to leverage their skills differently. Examples of gig work include freelance writing, graphic design, web development, and tutoring. The flexibility and freedom of gig work can appeal to many, as it allows individuals to choose when, where, and how much they work.

However, it's important to understand that this type of employment also comes with challenges. Gig workers often face income instability, as their earnings can fluctuate depending on the availability of projects or clients. Furthermore, gig workers usually don't have access to benefits such as health insurance or paid time off, which can leave them vulnerable and responsible for securing their own insurance coverage and tirelessly on the lookout for new work.

What you need to know 

Because of the unpredictable nature of gig work, individuals need to have a solid understanding of personal finance to manage their income, expenses, and savings effectively. Without financial literacy, gig workers may struggle to make ends meet or face financial difficulties during periods of low demand.

Gig workers should prioritise developing a financial plan that aligns with their goals and circumstances. This plan should include the following: 

Budgeting and tracking expenses

Budgeting involves creating a spending plan that outlines income, fixed and variable expenses, and savings goals. By tracking expenses and sticking to a budget, gig workers can gain better control over their finances and ensure that they allocate their income wisely.

To create an effective budget, gig workers should start by calculating their average monthly income and the costs of their basic needs, such as rent, utilities, and groceries. They should also factor in variable expenses, such as transportation or business-related expenses. By setting realistic spending limits and regularly monitoring their expenses, gig workers can make informed decisions about their financial priorities and identify opportunities for savings.

Saving and investing strategies

Gig workers should establish a savings plan with short- and long-term goals. Short-term goals may include building an emergency fund or saving for a specific purchase, while long-term goals may involve investment strategies.

When it comes to saving, gig economy workers should set aside a specific percentage of their income regularly. This can be achieved by setting up a standing order to automatically transfer money to a separate account specifically for savings. Moreover, gig workers should explore investment opportunities that align with their risk tolerance and financial goals. 

Managing taxes

As self-employed individuals, gig workers are responsible for completing their tax returns from A to Z. So, they need to know what their tax obligations are and ensure they comply with tax laws.

To effectively manage taxes, gig workers should keep detailed records of their income throughout the year. This includes documenting all sources of income, tracking business-related expenses, and maintaining organised records of receipts and invoices. This can help minimise tax liabilities and avoid potential penalties. 

Improving financial literacy 

Improving financial literacy is an ongoing process that needs continuous learning. Luckily, many resources are available, like the Bank al Etihad blog where you're reading this article!

We also offer Rise Academy, a free 2-day financial education program for different life stages to help you learn how to manage your finances better. Currently, there are two modules: one for young adults (18-25) and another for professionals (25 and above). If you prefer being in a group setting where you can ask questions and have discussions with others, sign up today!

The gig economy allows individuals to take control of their careers and pursue their goals on their own terms. With the right knowledge and strategies in place, gig workers can navigate the challenges of gig work while building a solid financial future. So, if you're considering entering the gig economy, take the time to educate yourself about personal finance to make informed decisions that will set you up for success. 

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