The gig economy refers to freelancers, contractors or anyone with a specialized skill set including graphic design, home repairs and web development. But freelancers have to consider things full-time works may not have to, like the cost of private insurance and setting aside taxes. When you’re self-employed understanding personal finance can make or break you but it can also offer you freedoms a nine to five can’t.
“The main feature of this type of work is freelancers get to take on as much or as little work as they want, set their own pay and generally work across a variety of different industries,” Perez said.
A common misconception Castro, the founder of Financially Wise Inc., runs into with freelancers is the belief that creatives can’t handle the financial side of things.
“Creativity is so valuable with finances and wealth creation. If you just stop saying that and take the time to learn and get yourself empowered, you’ll probably be really good at managing money,” Castro said.
So to ensure you get all those sweet freelancing perks, you’ve got to be prepared.
“Make sure you have a separate account for taxes. All and any money that you make, [make sure] you’re setting aside the right amount of taxes for that,” Perez said.
Keeping records in one place whether it’s QuickBooks or a notebook, will make things that much easier on tax day.
Another piece of advice from Castro was to think of yourself like a business from day one.
“Separate your business and personal checking accounts right away. Have a business name, have a business entity,” Castro said. “Maybe you have to learn bookkeeping, maybe you have to learn health insurance, learn about benefits. It can be frustrating and challenging but with those learning curves you get empowered and you keep going.”
During slow periods when less work is coming in, Perez recommended an emergency fund to ensure bills get paid.
For freelancers who are past the beginner stage and ready to level up, Castro suggested to start investing.
“Investing in things that will grow your money faster than your savings or checking account is the name of the game,” Castro said. “Start with one, figure out where your natural interest lies, focus on that investment category. Then commit to constantly learning.”
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