Tips for Managing Finances as a Freelancer or Gig Worker 

Do one thing: If you don’t already have a high-yield savings account, consider opening one and depositing your paychecks and other income there. You can then “pay yourself” by moving some of that money into your regular checking account. 

Gig Work is a Real Source of Income

With a thriving gig economy in the US, there are now millions of people who count income from freelance or gig work as the bulk of what they bring in. 

• Data on Gig Work. Research conducted by TransUnion found that, across all age groups, more than one-third (37%) of those surveyed reported gig work as a main source of income. Millennials, those born between 1981 and 1996, made up the largest group (55%) of adults who consider gig work as a main income source in the poll.

• Fluctuating Income. And while gig work typically offers more freedom than a conventional 9-to-5 job, it can also cause some pressure on your pocketbook – and nerves – when your income fluctuates from month to month. If you’re one of those piecing together several side hustles to make ends meet, take heart. There are some strategic steps you can take to more successfully manage your money and plan for the years ahead.

Create a Cash Cushion

Audrey Emerson, CFP, founder of Cents of Joy Financial Planning, launched her company specifically to support self-employed creatives and freelancers.

Separate Cash and Emergency Savings

“The first thing I always tell freelancers with inconsistent income is to keep a healthy cash cushion to be able to draw from during periods of low or no income,” she says. “While this isn’t a flashy money hack, I’ve never met a freelancer who regretted having a little extra cash when a big job falls through.”

How Much Cash Cushion?

How much you should keep on hand depends on your circumstances, Emerson says, but a rule of thumb she shares with clients is:

• Have enough to be able to cover 6 to 12 months of living expenses.
• If you are single and no one else relies on your income, you may be able to get away with less than 6 to 12 months.

“Parking that cash in a high-yield savings account, not just a regular checking or savings account, allows you to earn interest while keeping those funds totally liquid and available to you,” she notes.

Keep Saving for Other Goals 

Even though freelancers and gig workers may not have the consistency of a regular paycheck, they shouldn’t set their other financial goals aside. Emerson recommends the following:

• Try to save a small amount monthly towards your goals.
• Sometimes, waiting until the end of the year is necessary, but you can miss out on dollar cost averaging into the market if you are investing.
• Start small, even if it’s just tucking $25 a month into a separate savings account.

“I’ve found that mentally this can help freelancers feel more on track versus waiting and doing a larger chunk at year’s end,” she says.

Maintain Budgeting

If you think that bringing in an inconsistent income means budgeting won’t work for you, think again. Certified financial planner Kevin C. Feig, who is a CPA and founder of Walk You To Wealth, says when it comes to budgeting for the first time, it’s smart to start with a tried-and-true budgeting app or methodology. Why? Feig finds that many people tend to underestimate their spending by a lot.

Try a Budgeting App

By using budgeting software or an app, they often quickly realize they are spending two or even three times what they thought. “Once the actual spending scale is known, evaluating intentional versus unintentional spending can begin,” he says. Sometimes, unintentional expenses are those that don’t provide a sufficient benefit to your life, Feig says. Other times, they’re the ones that seem to happen when you’re just not paying attention. 

Review Expenses

By periodically reviewing expenses, Feig says, you can eliminate spending that doesn’t align with your priorities: “For instance, if you are paying for five streaming services but haven’t watched three of them in months, consider canceling those subscriptions.” 

Use the Budget You Can Stick to

Unfortunately, just as it can be hard to stick to a diet, it can be difficult to maintain a strict spending budget. So for Feig, a key to sustained financial progress is to eventually move away from traditional budgeting, which often doesn’t work long-term.”  

Consider Reverse Budgeting

Once you have an idea of where your money is going every month, you can establish a financial investment plan or a reverse budget. To do that:

• Begin with saving and investing.
• Spend the remaining funds without meticulously tracking every single expense category.

This approach is particularly beneficial for those with inconsistent incomes, he says, as starting by moving money into savings and investment accounts ensures expenses can be adjusted monthly without compromising retirement or other financial goals.

Don’t Forget to Save for Taxes

While you may not feel as if you are earning enough to cover everything consistently, it’s important to save some of your earnings to pay Uncle Sam regularly. Samantha Mockford, CFP, an advisor with Citrine Capital Advisors in San Francisco, recommends the following: 

• Set aside a percentage for taxes.
• Keep funds in a separate, high-yield savings account.
• Make quarterly estimated tax payments.

“The IRS does not like people earning money throughout the year but only paying once at tax filing time.” Mockford notes.

With reporting by Casandra Andrews