Connect with us
Mortgage consulting services Canada

Business

Financial strategies for the gig economy

(Special) – While the new “gig” economy can open up a whole world of business and lifestyle opportunities, it has its own challenges that require planning and risk management strategies that a growing number of Canadian gig workers need to take to achieve financial security in an insecure work environment.

“The first thing people have to recognize is that when you are working on your own the risk is all with you,” Chris Buttigieg, Director, Wealth Institute, BMO Wealth Management, said in an interview. “It’s always important to check your current situation and see what the financial risks are. The freelance economy can be enticing and lucrative, offering flexibility and the option to work within one’s speciality and have a better work-life balance, but it comes with its own set of challenges.”

Buttigieg says gig workers need to have a financial plan that includes what he calls a “minimalist” budget that keeps personal and business expenses separate and manages them when income fluctuates.

He suggests creating an emergency fund in good times of three to six months of expenses which can be used when income is low.

“The Tax Free Savings Account is a great vehicle for an emergency fund,” Buttigieg said. “Any income earned within it is tax free, the money is liquid and accessible and you can contribute to it each year.”

Once you’ve set up a financial plan, create a business plan which documents exactly what needs to be done to make money and align with your financial goals, including retirement.

Then set up a savings plan for retirement and other goals. Payments to retirement accounts like a Registered Retirement Savings Plan (RRSP) and TFSA can be automated to develop a consistent savings habit. It may be adjusted on a quarterly or semi-annual basis as income fluctuates.

One of the biggest challenges many self-employed workers find is getting organized. It’s important to report all income to the appropriate tax authorities and to make your Canada Pension Plan and Employment Insurance contributions. Be sure to keep good records of all your income, expenses and deductions that you can qualify for. If you’re in doubt, get professional advice.

Health-care coverage is another major issue for gig workers. If you have a spouse or partner, check to see what their coverage is and if there are things that you qualify for.

“One in three households in Canada has at least one person in the gig economy,” Buttigieg said. “Check on your spouse’s or partner’s plan to see if there are benefits you can access. This can really help to alleviate a lot of the risk of working alone.”

If you have no coverage, get your own. Invest in health and medical insurance coverage to get the treatment you need even if your budget is tight. Your greatest asset is your ability to work and make an income, so it’s prudent to protect your earning potential.

If you have debt, pay it off and avoid taking on any more, if possible. It’s easy to take on debt when income is low, but if you have to, make sure you set up a repayment plan to pay it off as soon as possible.

“The beauty of being self-employed is that you can work on your own schedule, but you have to realize that you likely have to do everything yourself, so get help where you need it, have a plan, review it every six months or so and make it flexible so it can change along with your circumstances,” Buttigieg said.

 

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Copyright 2019 Talbot Boggs

Talbot Boggs , The Canadian Press

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Connect with us Facebook

Recent Posts

Contact Us

Contact

Trending