This piece was written by Kristen Baker, a finance writer who covers topics related to improving one’s financial situation, getting out of debt, and more! She hopes her pieces provide great insights to readers on how to become savvier with their money.
When working in the gig economy, knowing how to get a handle on your finances can be the difference between success and failure. Due to the nature of this type of work, gigs come and go at a sporadic rate. Sometimes you have frequent work, and other times you can go weeks without finding a gig.
While there are ways to make extra cash while you’re looking for work, it is still crucial to understand how to manage your money. Planning for times when you won’t have much work allows you to enjoy more financial stability when money might be tight.
We’ve put together some strategies for achieving financial success between gigs.
Set up long-term budgets
Knowing how much you spend every month can help you have a solid idea of what you’ll need to allocate from each gig towards necessities, such as housing and food. As gig payments are less consistent than a weekly paycheck, it’s important to properly handle your finances so you don’t spend your money too quickly.
This is where having a determined, long-term budget comes into play. A budget can help you keep an eye on not only your expenses but how much you’re spending within a specific period of time. To get started on one, you can use a basic spreadsheet, such as Google Sheets or Excel. You can then create different columns to keep track of your monthly costs.
First, write down all of your major necessary expenses such as housing, food, transportation, utilities, and debts. Then, consider how much you spend on other expenses, like social activities and shopping. This is the non-necessities portion of your budget and can be cut down when needed so that you can meet payment deadlines on necessities. Finally, calculate the sum of all these expenses so you can have a general idea of your monthly bills.
Month over month, compare your budget to what you expect to earn from gigs. Doing so can give you an idea of if you will be able to pay for your necessities, and if you will need to cut back on certain areas. Ideally, you should also have extra money left over at the end of the month to put toward savings.
Streamline your gig payments
Being paid in a timely manner is crucial to making sure you’re able to pay your own bills and to avoid any complications when it comes to your financial health. However, procrastinating clients, late gig payments, or faulty checks can present a challenge to paying your bills on time. To help prevent these situations from complicating your business, it’s important to streamline your payment process early in your career. When they do occur, the problem won’t take too long to fix due to your time planning ahead.
If possible, set up direct deposits with venues you typically work for, as well as any payment processing service you might use. This is often the most secure way of receiving payments, as it avoids the complications that can arise from checks and cash. GigSalad allows you to set up a direct deposit for your gigs, which is faster than PayPal or checks. Certain digital banking platforms provide access to paychecks two days early. This makes it possible to get your money sooner and can be vital when managing expenses between gigs.
Ensure you have access to a bank account that allows virtual deposits so payments are quickly placed into your account. Most online deposits can be done by taking a photo of the check on your phone using your bank’s app. Cash deposits can be made at bank locations or certain ATMs.
Track your spending
Between gigs, expenses can pile up quickly. Travel costs like food, gas, and other basic living expenses can make being a gig worker a difficult endeavor.
While a budget is one way to track your expenses and prevent overspending, it won’t do much good unless you’re monitoring things on a frequent basis. Costs add up quickly, and without keeping an eye on them, your cash could run down sooner than you expected. If your bank has an app and notifications available, activate them for frequent updates on your balance after every purchase.
It may help to set aside money for necessary expenses in a savings account that can’t be accessed using your debit card. This can prevent you from overspending on non-necessities and allow you to re-allocate this money towards more vital purchases.
Create backup funds
Unfortunately, financial difficulties may still arise with a well-crafted budget, especially in cases where finding a gig is particularly difficult. Thankfully, there are measures you can take to provide yourself with backup money during these challenging periods of time.
Take some time to set up an emergency fund. This is an amount of cash put into savings meant to cover expenses for a period of time without money. This can provide a valuable safety net down the line, in cases where finding work is more challenging than usual. You’ll also be covered for other emergencies like a car accident or medical bills.
How much should you save? We suggest basing your emergency fund on the longest time you expect to pass between gigs. For example, let’s say the longest stretch between your gigs in the past is around two months. You should have two or more months’ worth of expenses set aside into the emergency fund. While it may seem like a lot to put away, you can build it over time by adding funds from every paycheck. Most banks allow for automatic debits into a savings account, too, so the money is moved before you have a chance to spend it.
Managing money between gigs is not always easy. However, by budgeting, tracking spending, and creating backup funds, you will have plenty of resources at your disposal to help you get through those periods of time between gigs.