As the workplace landscape is constantly evolving, it is evident that more and more employees are securing jobs in the gig economy. This trend can be attributed to advancements in technology and the values of the modern worker. These workers can be characterized as freelancers or independent workers with short-term contracts. They may work for companies such as Uber and Lyft, or some can hold positions such as accountants and transcriptionists. Many choose this option because these jobs offer flexibility, salary control, and autonomy. In fact, one quarter of workers participate in the gig economy in some capacity with that number only increasing.
While there are many positives to taking a job in the gig economy, it is also important to consider that traditional workplaces offer benefits that most gig companies do not offer. This is important to take into account when financial planning before transitioning into an independent position. This article will lay out the important steps to take before securing a gig economy job to ensure future financial stability and protection.
Jobs in the traditional workspace usually offer benefits such as retirement contributions, health insurance, life insurance, and disability insurance. Some companies offer additional benefits such as gym memberships, pet insurance, and child care assistance. While these are great additional perks to have, it is important to filter out the necessary benefits to budget for as a gig economy worker to ensure that you are not left vulnerable.
Research health insurance options
Health insurance is an important benefit that is usually offered in the traditional workplace by offsetting the cost of monthly premiums. Because premiums are being offset by your company, these plans tend to be less expensive than purchasing a private plan on your own. As a gig economy worker, more likely than not, health insurance will not be offered— so you will need to decide whether or not this is a benefit that you will obtain after transitioning to an independent worker.
Health insurance used to be mandated by the Affordable Care Act for all individuals to secure, but in 2017, the Tax Cuts and Jobs Act removed any penalties associated with forgoing private health insurance. Even though there is no longer a penalty for not having health insurance, consider the financial implications of forgoing some type of coverage compmletely before deciding to go without health insurance as a gig economy worker.
If you are married and your spouse has a plan through their employer, check your options and see if it would be possible for you to be added on to their family or spousal plan for coverage. If this is not an option, and you decide to purchase a plan on the private marketplace, there are different levels of coverage available.
It can help to consider your average cost of doctor visits and prescriptions per year to find a plan level that does not leave you underinsured, but also so that you’re not overpaying and over-insured. Depending on your health, you might also be able to get away with purchasing a catastrophic plan, which is usually significantly less expensive per month but would protect you from an accident or a large, unexpected medical cost. When you purchase a catastrophic plan, you will have to pay for all of your medical costs upfront. This is because they have a very high deductible that must be hit. However, this could be a good option to protect you from a significant financial loss in the case of an unanticipated medical cost.
Reevaluate life insurance policies
Many companies offer some form of life insurance as a part of a paid group life program, while other organizations offer supplemental life insurance options or even coverage options for family members that do not work for the company. Life insurance is an essential benefit because it can cover some or all of your lost potential earnings if you were to pass away. This allows your family members and dependents to be financially protected from an unthinkable loss while also ensuring that they are not responsible for debts that you may leave behind, such as loans, credit card debt, and funeral costs.
As a gig economy worker, it can be difficult to project your anticipated income if you are just starting out. However, it is important to secure some kind of coverage, especially if you have family members that depend on your income. As an independent worker, it could be beneficial to find a term life insurance policy to protect your family and assets in the case of an unforeseen event. Term life insurance policies are less expensive than whole life insurance, making this type of policy ideal. When determining a coverage amount, consider your estimated projected income and your current debts to ensure adequate coverage. Remember to account for the cost of life insurance in your monthly budget when transitioning into a job in the gig economy.
Look into scheduling changes
In many traditional jobs, there are set hours where you must clock in or out for the day. This can simplify your schedule because you know to plan around your working hours. Many gig economy workers choose to transition into this type of working environment because they have the ability to make their own schedule. This flexibility can be very beneficial; however, it is important to designate some kind of schedule so that you are able to find a balance between work and free time. This can be difficult because jobs in the gig economy can tend to have unconventional hours, but make sure you are finding time to regroup and recharge to be the best version of yourself possible.
Allocate sick and vacation time
When choosing to become a gig economy worker, you can essentially set your own schedule, which is different from the traditional workplace where your schedule is usually dictated and you are given a certain amount of vacation and sick time per year. If you are trying to project your annual income, remember to designate the days that you might miss for illness, personal time, or vacation. Additionally, it can be helpful to set a designated time to take a vacation so that you don’t experience burnout because it can be easy to overlook this benefit.
Keep retirement in mind
Depending on where you are in life, retirement might seem like a long way off. Remember that 401K contributions and company matches can offset the high cost of retirement, so without this benefit, it is important to be diligent and intentional about saving for retirement on your own. Whether that is through a private IRA or Roth IRA account or saving through investments, remember that planning for retirement is an important step in securing a stable future. Because it can be difficult to gauge your projected income when first starting out in the gig economy, you might start off small with your retirement savings but as your income starts to increase, consider increasing that amount each month.
Because the workplace is evolving and employee needs are changing, the gig economy is a popular place for individuals to look for work. Remember that with intentional financial planning, you can secure a job that allows more flexibility and independence, while still ensuring that you will have a safe and stable financial future