The New Normal: How the Gig Economy Highlights the Need for Emergency Savings
There’s always been a population of workers in the gig economy within Texas and across the United States. Gig workers come from nearly every industry, including writers, editors, designers, drivers, consultants, and independent contractors. The list of roles within this realm is long, complex, and growing daily.
Currently, there are more than 73 million Americans working gigs this year. It's estimated this number will rise to 86.5 million by 2027. And while many work part-time to supplement their income, others have taken gig work full-time.
Full-time gig workers face additional challenges, primarily due to the uncertain nature of the work. In addition to the fluctuations in this type of work, these workers could also face difficulties having enough money saved to cover emergencies.
If you’re a gig worker, you must know a few things about emergency savings to protect your finances.
Why Gig Workers Need Emergency Savings
The idea of being your own boss is exciting! But a few other things come along with it.
- You’re often the only one running the show, so you must wear many hats, such as worker, marketer, bookkeeper, and more.
- You can set your hours, but you also don’t get paid if you fail to work. There is no PTO, sick, or even vacation pay to utilize. Gig workers often work under multiple contracts simultaneously because relying on just one contract risks their earning potential. If that one contract ends, their income disappears.
- Freelancing work naturally ebbs and flows. Some months gig workers may have a lot of work coming in, while others might be lean with little-to-no work.
- Delayed client payments can present other challenges. And this is in addition to any unforeseen challenges or life emergencies. If you have set aside funds for emergencies, you're better prepared for something unexpected during one of those lean months. Saving for such emergencies can help ease stress, allowing you to continue focusing on building your independent career.
How Much Money Do You Need?
Ask anyone how much money you need in an emergency account, and you’ll likely hear “enough to cover 3-6 months of expenses.” While this might work for many people, it gets a little trickier for gig workers. You could stick to the 3-6 months scenario, but aiming closer to 9-12 months of expenses is better. A more substantial cushion is often better when your workload is inconsistent from one month to the next.
How to Start Saving Today
If you haven’t started your emergency fund as a gig worker, now is the time to save. Starting is easy when you establish a plan, which can include:
- Determining your monthly expenses.
- Calculating how much you’ll need to fund your savings.
- Creating a reasonable budget that works for you.
- Setting monthly and quarterly savings goals.
- Reducing unnecessary spending.
- Keeping your emergency savings separate from regular savings and checking.
- Avoiding the temptation to dip into savings for non-emergency reasons.
Extraco. Extraco Dough.
At Extraco, we want you to have extra dough. With the new Savvy Savings program, every debit purchase you make automatically rounds up to the nearest dollar and puts the difference in your savings account. It's an easy way to grow your savings that almost makes too much sense.
Tips to Cut Spending and Optimize Saving
Your money is a precious resource to help you now and in the future. So, we’ve compiled a short list of tips to help you find ways to reduce unnecessary spending and improve your savings.
- Work with a budget.
- Track your spending habits.
- Cut back on dining out and coffee shop purchases.
- Use coupons and discounts when possible.
- Cancel subscriptions you no longer use.
- Avoid impulse purchases.
Learning to Thrive: Have a Long-Term Financial Plan
Enough money for retirement is essential for everyone, especially for gig workers who fund their entire nest egg. Currently, 74% of gig workers are growing their retirement funds. It’s reasonable to think that the earlier you start saving, the more you’ll have later. Working with a qualified financial advisor, like Extraco Wealth & Trust Advisors, can help you create a reasonable plan to achieve your future goals.
Connect with an Extraco Wealth & Trust Advisor today!
Extraco Banks Wealth and Trust is the oldest trust company in Central Texas. We provide tailored plans to meet your unique needs when it comes to your future.Request a Consultation
As a gig worker, you must wear many hats and take on more responsibilities than you might as a traditional employee. This kind of work provides several advantages, including more freedom and flexibility to structure your work in a way that aligns with your preferences. However, there are a few caveats, mainly regarding financial stability. Using a reasonable budget, reducing unnecessary spending, and saving for emergencies and the ups and downs of the gig economy will help. Make sure you put in place a long-term financial plan, too.
Thankfully, Extraco Banks will be with you through each step of your journey.