The gig economy is huge - so huge that as many as 15% of all workers engage in moonlighting, temping, gigging, ridesharing, or other forms of freelance work. Ryan McHenry, Pruuf’s Founder, recently published an analysis of the gig economy, uncovering both its positive and negative aspects. Check it out if you’d like some insight on where the gig economy is headed, or read on if you already participate in it and would like some tips on making sure you get the most out of it that you can. We at Pruuf have personally seen many successful friends and acquaintances overlook some of these points, so be sure to pay attention!
Define your Goal
It can be easy to jump at opportunities to make extra cash without fully understanding the underlying motives for why you need to do it. This is important to think about, because your situation will directly affect every other aspect of what your approach to the gig economy should be.
Are you looking for a temporary and supplemental income boost? Maybe you have a one-off need to pay down your student loans, scrape together a downpayment for a new car, or get a boob job (we’re not judging - just being real).
Are you looking for long term secondary income? For many, their regular job no longer pays all the bills. This sucks, but extra side work can help make ends meet.
Are you looking to build up certain skill sets? Not all gigs consist of taxiing people around or delivering food. Many freelance and temporary work involves, requires, and builds up skills that are highly marketable in the workforce.
Are you looking to make your primary income from the gig economy? Contrary to what some may think, this is entirely possible. However, it requires some extra consideration, so pay close attention to the following tips!
Determine the Cost of Doing Business
As annoying as it may be, making money also costs money. Determine what your own cost of doing business is by researching taxes, fees, insurance, and the time/opportunity cost of carrying out your gig work. Uber drivers, for example, pay a portion of their earnings directly to Uber, pay taxes, pay for gas, pay for insurance, pay for the wear and tear on their car, and also pay by investing their time into driving people around. Understanding these costs will help you determine which opportunities truly net you the highest compensation possible.
Freelance and gig work usually do not come with perks that full time, W-2 positions may receive. It may also open you up to legal risks, like if you’re a freelance accountant that slips up and adds an extra “0” to the end of something. Ensure that you protect yourself from any unforeseen mishaps.
Look for health insurance from a well-rated provider that offers adequate coverage. Do not just look for the cheapest price tag, since it may not provide any real benefit in a time of need.
Determine if your field of work requires that you carry any type of professional liability insurance, which can include errors and omissions gaffes that a customer may sue you for. Look for other types of insurance that may apply, such as cyber insurance.
Depending on the type of work you are looking to perform, consider incorporating yourself as a Limited Liability Company (LLC), which can protect your own personal assets in the event that your business is brought to court. It may also provide tax benefits. Be sure to consult an accountant and/or lawyer to determine if this is the right step for you.
Avoid Burnout and Seek Long Term Sustainability
Although the gig economy provides relatively easy access to work opportunities, it is important to remember that they still consist of hard work and potentially long hours. The struggle can be real if burnout sets in.
Once you’ve determined your cost of doing business and the real amount of “take home pay” you’ll net, it will be easier to determine how many hours you will need to work to meet your goals. An alternative approach is to set a maximum amount of time you are willing to work each day to help ensure that you maintain a healthy work-life balance. As you work more gigs and if you pay attention, it will be easier to determine what your energy and time limits are so that you can avoid burnout.
You owe it to yourself to feel like your extra work is amounting to something.
If you’re saving up for a large purchase, make sure you don’t splurge on unnecessary things that can quickly reduce the amount you save. Things like eating out, hitting up Starbucks, going for drinks, and almost any purchase that results from a “because I deserve this” mentality are big culprits that stand in the way of achieving your financial goals.
If you’re leveraging the gig economy to boost your skill sets, make sure you document your work, challenge yourself, study on the side, and build up some case studies and a nice portfolio you can use to nab higher paying gigs and jobs. There’s an awful Catch-22 out there in the labor market in which employers want to hire people that have already done the job they are looking to hire for, but it can be tough to learn how to do a job without having done it first. So, unless you are looking to make a lateral move or have an employer that is already investing in your growth, you’ll need to find - and document - ways to show your growth via alternative means.
Look for Efficiency
The amount of tips, tricks, and hacks articles out on the internet is pretty massive. It seems that there are hacks to maximize everything one could possibly do, so keep an eye out for little ways you can improve the efficiency of whatever gigs you choose to work. Maybe you’ve noticed that you make more money by renting out your room on Airbnb to more people for shorter periods as opposed to less people for longer periods. If you’re bilingual, maybe catering your services to foreigners can pay more in the long run. If you do freelance design work on the side, maybe designing websites can pay better than doing logos. Corporations leverage reams of data and go through many lengths to maximize their profits - such as the famous UPS move to reduce the amount of left hand turns their drivers take - so there’s no reason you shouldn’t try to find your own hacks.
As soon as you start working, determine whether or not taxes are being automatically withdrawn from your paychecks. If not, this can quickly add up and turn into a monstrous expense when April rolls around. Depending on how much money you make from the gig economy, it may be wise to consult with an account to figure out how you should handle taxes - as a 1099 consultant, through an LLC, if you should pay quarterly or annually, and so on.
Plan for the Future
Multiple reports show that Americans have not been saving enough for retirement, and considering that public safety nets and social security face a dismal future, individuals must be more proactive about establishing their own long term financial security. If you do not currently have a savings plan for retirement, start now. Roth IRAs are a must for any freelancer, since these investments do not tax you on your earnings when you hit retirement. Additionally, lots of savings-oriented apps are hitting the marketplace and providing different ways to make the idea of saving a reality. Acorn and Betterment provide automated investing options, and Robinhood allows for free trades if you’d like to more actively manage your investments.
Consider Microconsulting with Pruuf
Pruuf recognizes that everybody has something to contribute, and that we can all learn from each other. It is a microconsulting app that will connect people and their questions with subject matter experts and advisors (maybe YOU!) so they can talk things through. Advisors who receive good scores will be able to charge their own rates for the advice they give, and continued success will unlock extra perks. While some apps push you to work harder, Pruuf encourages you to work smarter. Don’t just work for the gig economy; make the gig economy work for you!