Gig Smarts: Freelancers’ Path to Financial Stability
Being your own boss requires a whole new perspective on household budgeting, tax preparation and retirement savings
If you're familiar with the freelance juggle, you know that gig workers typically can't count on regular paychecks hitting their bank account every two weeks like clockwork. For those who juggle freelance gigs, side hustles and unpredictable paychecks, managing finances looks much different than someone with a 9-to-5 employee job.
About 6.2 million workers over 55 are in the gig economy, according to a 2023 World Bank report. That economy is transforming personal finance in ways that traditional employment never did. In fact, the gig economy has changed the way those workers think about work and money. With variable incomes and scrambling to nail down your own benefits, your need for more flexible financial strategies is different than it is for people on payrolls. For freelancers, being proactive is vital.
"This isn't just about flexibility — this is about creating an economy where individuals have more control but also more responsibility."
"First, I think you need to build a financial ecosystem for yourself — separating your personal and business finances," says Jeff Mains, founder of Champion Leadership Group, a Dallas company that helps businesses improve leadership abilities to accelerate revenue growth.
"Open a business account, even if you're a freelancer, and start tracking every expense," he suggests. "By thinking like a business owner, you can see where you're profitable, where to invest and how to protect your cash flow during lean months."
Gig Budgeting
"Budgets that work for people with regular jobs and incomes do not work for this community," says Rita Martinak, a Certified Business Economist who offers freelance consulting on economic forecasts and data-driven strategies that drive business growth at COMPACOM, a loan-comparison website in Sacramento, California.
"For gig workers, it's not only about the rainy-day fund; it's about creating predictable cash flow streams in an unpredictable world."
"Gig workers and freelancers must create a detailed budget by outlining their monthly expenses and income sources," she advises. They must focus more on their income sources because they can be variable. And they require an extra cushion. Budgeting can help gig workers better understand their financial needs and their position when it comes to their money.
Set up a budget that moves with you, since you can't count on the same paycheck twice a month. Figure out your baseline — how much you need to cover housing, food, utilities and other essentials. Tracking your income with apps like YNAB (You Need a Budget) or Monarch, or even a basic spreadsheet can help you spot patterns and plan, so you're not caught off guard when work slows down.
"In my opinion, the biggest shift gig workers need to embrace is thinking in terms of value, not just money," says Mains. "Every dollar you save or invest should have a clear purpose, whether that's to provide you with future freedom or reinvest in your skill set."
"One unique strategy I've seen work for many gig professionals is investing in their own education as part of their savings plan," continues Mains. "Upskilling, if it makes sense, can often lead to a direct increase in your earning potential beyond what you'd get from just saving in a traditional account."
Freelance Saving and Investing
While setting up or maintaining an emergency fund is critical for all, it is more significant for members of the gig community because of the uncertainty in their income. Martinak says that, generally, an emergency fund of three to six months' expenses is ideal for people with regular income, but freelancers must consider maintaining an emergency fund of at least six months to a year to cushion against income fluctuations.
"By thinking like a business owner, you can see where you're profitable, where to invest and how to protect your cash flow during lean months."
"For gig workers, it's not only about the rainy-day fund; it's about creating predictable cash flow streams in an unpredictable world," says Mains. "For example, I often advise setting up recurring revenue models even in freelance work, whether it's a subscription-based service or long-term retainer clients. This brings more stability to your income."
Having some stable clients lets you invest regularly without having to pull money from your essential funds, and enables you to be more strategic about long-term wealth-building. Older gig workers should also contribute to tax-deferred retirement accounts. Since their contributions will not be matched by an employer, freelancers should increase their contribution to these retirement savings programs to get the full benefit of tax advantages.
Tools like a Solo 401(k) or SEP IRA allow you to contribute more of your earnings toward retirement than traditional employees. "I suggest automatic transfers to their savings and investment accounts to ensure consistent contributions," Martinak says.
Don't Forget Taxes and Insurance
A Roth IRA may be the way to go in this case because your contributions aren't tax-deductible, but the money grows tax-free, and you can take it out in retirement tax-free, adds Eric Croak, a Certified Financial Planner and president at Croak Capital, a wealth management fiduciary firm in Toledo, Ohio.
"The ability to pull out your contributions (not earnings) tax-free in a pinch is a real lifesaver when gig work can be inconsistent," adds Croak.
He also recommends that freelancers consider micro-investing, in which they regularly save small amounts of money — the actual amount saved in each period dependent on your income at the time.
Since freelancers must pay self-employment taxes, reserving a portion of each paycheck for tax obligations becomes crucial. "Making quarterly estimated tax payments is essential to avoid penalties and help manage cash flow better," says Martinak, who advises gig workers to consult with a tax accountant to learn how to navigate self-employment taxes and maximize their deductions.
Freelancers and gig workers also need insurance more than anyone else to protect themselves against potential income loss due to illness and injury. They should invest in disability and liability insurance. And if freelancers are their families' sole or primary earner, having adequate term life insurance is essential. "I suggest a sum assured of at least 15 times their annual income," says Martinak. Health insurance is another must, especially with increasing medical costs.
Financial Implications of a Gig Society
The number of gig workers, especially those over 55, is increasing by the day, which has significant implications for the broader economy. Many retirees work gigs to supplement their retirement income and stay active. The trend among older workers shows that retirement is no longer a "full stop" but a transition into a new phase.
The gig economy provides flexibility and ample opportunities for people who might not fit into traditional employment roles. Therefore, there's a growing need for policies that support retirement savings and financial security for non-traditional workers. "The gig economy contributes immensely to economic resilience by providing diverse income sources. It also helps reduce the dependency on single employers," says Martinak.
"The gig economy contributes immensely to economic resilience by providing diverse income sources."
Mains says the number of workers over 55 in gig roles speaks to a huge societal shift toward self-directed income streams. "This isn't just about flexibility — this is about creating an economy where individuals have more control but also more responsibility," he says.
As more people embrace gig work later in life, we will see more financial tools and services specifically geared toward helping gig workers manage their finances and retirement plans and even insure their future income streams.
