The term “gig economy” is defined as a workforce that’s defined by short-term engagements, temporary work, and independent contracting. These include but aren’t limited to freelancers, contractors, side hustlers, and anyone who is making money on the side or earning a full-time income with multiple short-term projects rather than the single full-time job.
Gig economy growth
The gig economy workforce is growing rapidly and that is because there are so many positives in areas such as remuneration, financial liberty, reduced anxiety and flexible working conditions. A brodmin.com case study states “Global Gig Economy is expected to grow from $204 billion in 2018 to $455 billion in 2023, a Compound Annual Growth Rate (CAGR) of 17.4%. The number of freelance workers is steadily increasing in the Western World. For example, the number of US freelancers is estimated to grow from 57 to 86 million by 2027 and the UK’s gig economy workforce more than doubled from 2016-2019 as it accounts for 4.7 million people.”
Transitioning into the gig economy world
According to a Washington Post article “36% of US workers participate in the so-called gig economy”. People are enjoying the idea of being their own boss, but how does one transition into it? Know how to handle your irregular income.
- For starters, gig workers must become very disciplined with budgeting. Gig workers have fluctuating incomes and they must learn how to live off that income when it hits the highs or lows.
- Do not splurge on your good months. It is so tempting but gig workers must understand that there will be flows of good and bad but learning the flows as well as preparing for the worst can help you successfully navigate this new working world. This is probably the single biggest mistake gig workers make.
- Set up a tax account. If your taxes are not withheld, this is an absolute must for gig workers. When tax season comes around it is important to have money saved for income taxes (federal and state). In many states, quarterly tax payments must be made. In addition, tax rates may be higher than for “regular” employees. Having money set aside for this will make your life so much easier and stress free.
- Plan for your retirement. As an independent contractor you are entirely responsible for planning for the future. Consider establishing and regularly contributing to your own 401K or other retirement account. This helps ensure a comfortable future while also cutting down on taxable income.
Follow nextSource on social media and our Working Knowledge – Associate Edition to learn more about gig workers and how to be successful in the future of work.