With more and more jobs in Canada shifting to part-time, freelance or contract work, Canadians are offered opportunities for work-life balance that haven’t existed on this scale in generations past. However, managing your finances and keeping debt problems at bay when your income could potentially be unstable isn’t easy. The “gig” economy is especially appealing to Millennials.
According to a survey from TD Bank:
- 73 percent of Millennials report having or anticipated having part-time/contract/gig work
- The major upsides to gig work are flexibility and work-life balance, according to respondents, although 87 percent report concerns with the employment type
- The biggest concerns included a lack of health and dental benefits, job security, no pension, no paid holidays and income volatility
“When your income fluctuates and you don’t have job stability, you are at greater risk of spending beyond your means or having to turn to credit to cover expenses. If you have part-time or contract work, there are additional steps that you need to take to make sure that you don’t find yourself with debt problems,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
Here are some suggestions on how to manage your finances in the gig economy.
It is important to have a household budget, but when your income fluctuates, you should do your budgeting on the low side of your pay. This may mean that you need to really consider needs and wants. You should cut wants out of your budget, and if you have months where your income is higher, you can use the extra money for those costs.
Save for income interruption
You should have emergency savings on hand, no matter what your job is, but when you have part-time or temporary work, recognize that income interruption (or drop) is most likely the reality of your employment status.
Make sure that you save a good portion of your monthly income to cover costs if you are in-between jobs.
Power up retirement savings
Given that you most likely won’t have a pension to fall back on if you are working in the gig economy, make sure to be aggressive with your retirement savings.
“Have multiple savings goals going on at once, including putting money away in the long term for retirement. Starting now is essential to make sure that you don’t have to rely on debt in retirement,” says Schwartz.
Plan your holidays well in advance. Given that holidays won’t be paid, and you are incurring an expense to travel on vacation, this hefty cost could have double the impact on your budget. Avoid taking trips on credit.
Investigate getting the necessary health, life and disability insurance privately. You won’t be able to count on this from your employer, so be proactive to cover these costs – which can be substantial- if you aren’t insured.