People are quitting their jobs in droves.
And it is not because they are retiring.
It is because they want to join the gig economy.
The gig economy as defined by Wikipedia is as follows: “a labor market that is distinguished by the prevalence of short-term contracts or freelance work rather than permanent jobs. As opposed to regular salaries, employees get paid in return for the “gigs” they perform.”
There can be some great benefits for those who want to trade the safety of a regular paycheck with the excitement and uncertainty of being self-employed. Let’s look at some of the benefits and drawbacks of the gig economy and the impact it has on your finances.
In the modern world that we live in, most of us can’t or choose not to, work in the usual 9 to 5. Whether we have kids, making a lifestyle choice or prefer to go surfing in the morning, most of us would choose not to be boxed into a 9 to 5 lifestyle.
One of the great advantages of the gig economy is you choose your lifestyle. If you want to work on those designs between 10 pm and 2 am you can. If you want to take every second Friday off to spend with your family, you can. You are your boss you can choose the lifestyle you want to live.
BASED ON RESULTS, NOT HOURS WORKED
One of the catch cry’s of the union movement was “an equal days pay for an equal days work.”
I think that is complete crap. And most in the gig economy would agree with me.
There is nothing more demoralizing when you do more work and get better results and don’t get compensated for your efforts. Most in the gig economy get frustrated by earning the same amount of pay as those doing half of the work we were doing.
The joys about the gig economy are you are paid based not the hours worked but on your results. And those in the gig economy are generally very efficient with what they do. If you can do a $3,000 website in a day, which may take your salaried counterparts two to three days to do, then you are going to be financially well ahead.
A good accountant is worth their weight in gold in the gig economy. Working as a contractor or in freelance work can open the doors to a significant amount of strategies to minimize your tax.
As an example, there are generally a lot more things you can claim as tax deductions if you are self-employed in comparison to an employee. These can range from small things like your mobile phone and home office to bigger things like the everyday running of your car.
Also, an accountant can help you with the structure of your freelance work.
Working in the gig economy is likely to open up a range of strategies that will reduce the tax payable in your name, which in turn means more money in your pocket.
BEWARE YOUR SUPER (AND OTHER BENEFITS)
Whatever you think of that ”big nasty boss” you had, one of the things they (usually) did is direct 9.5% of your salary into your super.
Unfortunately, those working in the gig economy rarely take the time to look after their super or any long-term investment plan, which often has a long-term detrimental impact on their financial situation.
I appreciate that in a gig economy you want to save every penny possible. However, if you don’t want to be controlled by a boss during your working years, you don’t want to be controlled by the government in retirement.
In summary, there are plenty of advantages to working in the gig economy, but you need a good team around you who can manage your finances so you can life the lifestyle you want to live. This includes reducing your taxes, getting your cash flow sorted, building your super and long-term investments and getting a Plan B in place.
Disclaimer: This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs.
Master Your Money Now Pty Ltd (ABN 65 627 229 681) is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523
Founder Of Master Your Money Now - Master Your Money Now
Chris Carlin is the founder of Master Your Money Now. Chris is passionate about helping others achieve their financial goals and live out their dream lifestyle.
Chris has been delivering financial advice for over seven years to Australians seeking to increase their income, understand super, protect their loved ones and plan for retirement. Chris is a regular commentator on blogs, LinkedIn and Instagram on finance-related topics.
Chris is based in Geelong, but regularly speaks to clients Australia wide via Zoom and Facebook. If you speak to your friends and family online, why not your financial planner?
Chris is a Certified Financial Planner through the Financial Planning Association of Australia. He has also completed a Bachelor of Commerce with Distinction from Deakin University, majoring in Finance and Financial Planning.
To this day, Chris still has a greylead pencil stuck to the top of his computer monitor.
Outside of Master Your Money Now, Chris is a passionate soccer fan and supports Melbourne Victory and Everton. He also follows AFL (Geelong), cricket (Melbourne Renegades) and Formula One (Red Bull). Chris recently got married to Natalie, a proud New Zealander!