How to Make Money in the Gig Economy
KEY POINTS
The gig economy offers freedom and flexibility in exchange for taking on more risk and responsibility
Earning potential may exceed the traditional job market, but gig workers must understand the financial risks and how to mitigate them
Professional advisors may be necessary to facilitate marketing, technology, accounting, taxation, insurance, and more
Welcome to the Gig Economy
Are you ready to embrace a world of flexibility, freedom, and endless possibilities?
Unsure of how to jump into the gig economy … and make real money?
If so, you have come to the right place.
The gig economy gives you the opportunity to be your own boss while breaking free from the shackles of traditional employment. There is great satisfaction from deciding the who, what, why, when, where, and how you will provide your services.
Whether you are a certified or skilled professional, artist, or entrepreneur, the gig economy is brimming with opportunities.
Just remember…
“If you fail to plan, you are planning to fail.”
The gig economy is not without its risks.
Income Potential by Gig
So just how much money can you expect to earn in the gig economy?
The table below shows estimated income ranges for some of the most popular gigs. The ranges exclude expenses (operating and capital) and may vary dramatically due to a myriad of factors (e.g., qualifications, experience, reputation, country, location, seasonality, market conditions).
It is important to understand the differences between cash flows and profitability when developing your financial plan, if you want to eventually convert your gig into a real business. You may need to learn how to raise capital in order to sustain and grow your business.
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INCOME PER HOUR (before expenses) |
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10 |
20 |
30 |
40 |
50 |
60 |
70 |
80 |
90 |
100+ |
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Property Rental |
Property dependent |
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Videographer / Filmmaker |
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Marketing Consultant |
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Voice-Over Artist |
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Event Photographer |
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Website Developer |
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SEO Specialist |
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Software Developer |
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Creative Copywriter |
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Graphic Designer |
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Video Editor |
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Social Media Manager |
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Event Planner |
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Professional Organizer |
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Translator / Interpreter |
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Personal Trainer |
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Freelance Writer |
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Handyman / DIYer |
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Tour Guide |
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On-line Tutor |
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Home Cleaning |
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Virtual Assistant |
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Ride Sharing |
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Dog Walker |
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Food Delivery |
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Gig Economy Expenses
The type and amount of expense will vary by the service offered. The ability to forecast and manage expenses is critical to achieving profitability. Some common types of expenses include:
Transportation
The cost of commuting on public transit should be relatively easy to incorporate into a budget as it is disclosed on set fare schedules and based on distance. The cost of utilizing your own vehicle to commute or provide ride sharing or delivery services is more complicated.
The cost of purchasing a new or used car and related operating and maintenance costs can be significant. We performed a sensitivity analysis on ride sharing services and estimated the cost of repairs, maintenance, depreciation, and insurance can amount to approximately $9/hour. Such is in addition to the estimated $4/hour for gasoline.
Consideration should be given to creating a separate savings fund specifically for transportation expenses as repairs and depreciation can be substantial and impact cash flows on an infrequent basis.
Equipment and Tools
Specific equipment, tools, and technology may be required for some gigs. Such may include smartphones, laptops, specialized software, cameras, vehicles, skilled trade tools, ladders, and more.
The initial cost and eventual replacement of the tools can be costly as can be the ongoing maintenance. Technology continues to evolve and may necessitate hardware and software updates or replacements. Physical tools can depreciate quickly or break unexpectantly.
Like the transportation costs noted above, consideration should be given to creating a separate savings fund to cover these types of costs.
Insurance
Gig workers must ensure they obtain appropriate insurance coverages to protect themselves and their assets. Insurance requirements will vary based on the services being offered.
The common workplace insurance considerations include liability insurance, health insurance, professional indemnity insurance, vehicle insurance, and life insurance.
The options pertaining to each type of insurance should be thoroughly researched. Such will take time and involve obtaining and comparing quotes from different insurance companies. Consideration should be given to engaging an insurance broker with expertise in the field.
Gig workers should be prepared to pay higher premiums for insurance coverages (e.g., drugs, dental, vision) that are typically offered by traditional employers. Traditional employers can secure reduced premiums due to the number of employees they attach to a single insurance policy.
Marketing and Promotion
Some gigs require you to attract and develop your own client base. Such may require marketing and promotion. These costs may be ongoing for the duration of the period the services are offered.
These expenses may include website design, on-line advertising, business cards, and promotional materials. Social media and networking may also form part of the strategy.
Research the strategies that may be best suited for the services offered. Perform small trial promotions to gain invaluable insights at a modest cost. The budget can be increased as the effectiveness of the trial strategies are proven.
Training and Education
The gig economy has relatively low barriers to entry, depending upon the type of services being offered. Therefore, competition can be fierce.
Continuous training and education are essential for gig workers to remain competitive. Time and money should be set aside to attend relevant workshops, conferences, online courses, and certifications.
This process can be very synergistic as it lends itself well to networking with individuals in your chosen field. Such may lead to strategic partnerships, sharing of resources, referrals, and more.
Taxes and Accounting
Gig workers are independent, and they must track their income and expenses to facilitate reporting such on their annual tax return.
Not everyone has the skillset to be an accountant and tax specialist in their spare time. Consideration should be given to accommodating the cost of engaging professional advisors in the budget.
All invoices issued and receipts received will need to be methodically kept and recorded. Travel logs should be kept if the service provided requires the use of an automobile. The governing tax authority may require the payment of tax installments throughout the year instead of submitting a lump-sum payment with the annual tax return.
Foreign Exchange
If your gig will generate income or incur expenses in a foreign currency, your bank may charge you foreign currency exchange fees exceeding 4%. Company’s like Wise can substantially reduce or eliminate these fees and help you keep more of what your earn.
BOTTOM LINE
The gig economy can accommodate workers with a wide variety of skill sets. Each one becomes an entrepreneur when they enter the gig economy. They gain freedom and flexibility while taking on more risk and responsibility. Take the time to do the necessary research and strategic planning to build a strong financial foundation. There will be ups and downs, but a well laid plan can mitigate many of the risks along the way.
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