Saving and the Gig Economy
A recent survey shows that almost two-thirds of adult Americans have less than $1,000 in a savings account or emergency fund. And surprisingly, the results don't seem to vary much by age: 60% of Americans aged 55-65 have essentially no savings.
While this outcome may be more understandable and tolerable for the younger age brackets, imagine being in your 50s or 60s and having so little set aside for emergencies! The stress and vulnerability of having essentially no money set aside for the inevitable bump in the road is something none of us want.
It will take time, but building a good cushion (we recommend three months of expenses) is an essential part of buying your financial freedom. Cash is always hardest to come by when you need it the most, so start putting some aside now and set your mind free!
Savings is a battle as it is. In many ways we are pitted against talented marketing types spending big bucks to get all of us to spend more of our money now. On the other hand, there are very few advertisements that encourage us to save.
Gig workers have several extra barriers to deal with. First, income is erratic and unpredictable. This actually makes savings more necessary but harder to do. Second, some folks get paid in cash, and nothing is easier to spend than a pocket full of cash after a hard day! Half the battle of savings involves tricking yourself so you don't think of all of it as available for spending. That's tough to do when it's in your pocket! Third, no one is withholding taxes for you. So unless you're making quarterly payments, they come due all at once like a rock through your window.
Our advice is: first of all, recognize and accept the challenge. It is harder but even more necessary to save as a gig worker. Then, set a savings goal based on your average monthly (or weekly) income. This way you can save more when you make more and less when you don't.
And, pay quarterly taxes to avoid an April blow up!