How to budget if you're working in the gig economy


Freelancer, temp, contractor, part-timer, digital nomad…whatever you call yourself, if you’re not employed full-time by “The Man”, you’re a gig economy worker. And that means you’re all alone when it comes to handling your finances. In the first of a three-part series, Lauren Willoughby, Retail Administration Manager at Sygnia, gives gig economy workers the low-down on how to handle their money, plan for retirement and save for it.


By 2020, more than 40% of the global workforce will consist of people working in the gig economy, according to the Intuit 2020 Report, which looks at significant trends and forces affecting consumers and small business over the next decade.

That means around 3 billion of the 7.5 billion people estimated to be on planet Earth by 2020 will be their own boss, call their own shots, make their own working hours, work from home or even travel the world while working flexi time.

That’s the glossy side of being a gig worker. The duller – and sometimes dark and scary side – is that there’s no regular pay cheque. You’ve got to constantly hustle, you’re at the mercy of flaky, demanding and/or non-paying clients, and there’s no one but numero uno to handle all those grudge deductions from your pay cheque: tax, medical aid and retirement savings.

As a 2018 Harvard Business Review study of a wide spectrum of gig workers noted: “All those we studied acknowledged that they felt a host of personal, social and economic anxieties without the cover and support of a traditional employer.”

From the freelancer friends I’ve spoken to, I can confidently summarise these anxieties into three main woes:

  • Not having a steady income. How do you budget and save when you don’t know what’s coming in?
  • No time to manage your money. You’re so busy pitching for work, meeting deadlines, managing your billing and chasing up non-payers that making a savings and investment plan and putting it into action falls way down on the never-ending to-do list.
  • Feeling unequipped. You have to make all the financial decisions yourself and decide how and where to invest, but feel like you’ve been thrown into a shark tank.

I’ll begin this series by addressing how gig economy workers can stabilise their income. It all comes down to the most important basic: budgeting. 

5 Budgeting Basics for Gig Economy Workers

I know, budgeting is a real killjoy, but it’s especially important for the self-employed, who need to figure out ways to be financially secure and to build on that security.

1. Cut it into chunks

I’m a fan of the 50/30/20 budget rule, popularised by US Democratic Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan.

Basically, 50% of your net income goes to basic needs (groceries, housing, utilities, school fees, etc); 30% goes to “wants” (entertainment, clothing, etc); 20% goes to debt repayment and savings.

I find breaking up your budget into these smaller “chunks” and seeing where you can trim costs is a much more manageable way to get a grip on a budget.

2. Or work backwards

Natasha Johnson, a friend who’s a freelance graphic designer, swears reading Sam Beckbessinger’s How To Handle Your Money Like A F*$@king Grown-Up had her budgeting – and saving for retirement – for the first time in her life (she’s 36).

Cape Town-based Beckbessinger follows the Warren Buffet approach to budgeting: “You don’t save what’s left after spending. You spend what’s left after saving.” In other words, you work backwards, starting with how much you want to save every month and building your budget around this.

“It made me realise my previous method was all wrong, at least for me,” says Natasha. “I’d always aimed to save whatever was left over at the end of the month, but things always ‘came up’ – a birthday, a shoe sale, another dinner out – and there was always zero left at month end. And then the cycle would repeat itself the next month.”

But, as Beckbessinger says in her book, the save first, spend second approach “helps your little monkey brain flip the narrative around”.

Natasha adds that, for her, the best part of breaking her non-saving cycle has been psychological: “Before, I would berate myself and get despondent about not being able to get my spending under control. Now I miss out on a few things, but it’s totally worth it – I feel like a lot of the head space I spent stressing about money has been freed up.”

3. Pay your dues

Whichever budgeting method you use, make sure you include your tax commitments. Not because you love SARS, but because it can work very well in your favour.

Richard Holmes, another friend who’s been a freelance travel writer for 15 years and flies around the world for a living (tough job), is a provisional taxpayer, as most freelancers are. He sets aside 25% of what he earns every month for provisional tax and deposits this into a high-interest earning money market account so that he makes a bit off his “tax grudge”.

But that’s not the only way he makes his tax stash work for him. “When it comes to ‘that time of year’, I usually get a nice chunk of it back and I stick it straight into my tax-free savings account (TFSA) to give my retirement savings a nice little boost,” he explains.

He’s onto something here, and I’ll talk more about how gig economy workers can use TFSAs to save for retirement in my next article.

4. Pay yourself a salary

Richard has some more safe advice: “I don’t live hand-to-mouth or splurge when I have a good month. I pay myself a set salary each month, which I’ve worked out based on my budget.”

“This also helps me to know the exact minimum I need to get in each month to make ends meet,” he adds. “If I see I’m not going to make that, I go on a mission to sell more stories.

5. Stockpile salaries

A set salary sounds good, but how do you manage to pay yourself when you hit those inevitable dips in income, or when clients are late in paying?

Easy, Richard reckons. “I always have at least two, but preferably four-months’ worth of salary saved in a money market account. If I’m short one month, I take it from there and then top it up again when more money comes in.”

Source: Thriving in the Gig Economy, Harvard Business Review (2018). Willoughby is retail administration manager at Sygnia. Views expressed are her own.

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