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Finance and the Gig Economy

The world of employment is changing rapidly. Gone are the days of employee and employer loyalty. The pendulum has swung from safety and security in employment to freedom, variety, and financial stress and responsibility.

What Is the Gig Economy

The "gig economy" is the workforce otherwise known as contingent workers. These are self-employed workers with a roster of clients and customers who may come and go. They include freelancers, consultants, contract workers and temporary workers. They may work through staffing agencies, with companies like Uber or Upwork, or they may work directly with companies that farm out projects to non-payroll workers.

The trend toward a contingent workforce benefits both employers and workers. Employers gain the flexibility of paying by the hour or project, rather than retaining talent for whom there may not be a steady supply of work. They also save on many of the costs of hiring permanent workers, including office space, equipment and benefits. Workers who enjoy the flexibility and variety of working for more than one employer — even across fields and industries — can do what interests them, when they choose (provided they have the talent and wherewithal to find the work).

There is a caveat for gig workers, however. The employer no longer plays the role of ensuring that financial needs are met and planned for adequately. Gig workers need expert financial guidance in areas including financing business operating costs, setting aside discretionary funds, retirement planning and healthcare. As you will see from the trends and statistics below, this represents a boom in opportunity for financial advisors.

Trends and Statistics

If you are planning on a successful career as a financial advisor, gig economy workers should comprise a growing percentage of your clientele. According to Nation1099, trends show strong interest in contingent work as well as strong momentum toward the growth of the contingent workforce in the U.S. and around the world:

  • Approximately 11% of the working adult population in the U.S. are currently working primarily as full-time independent contractors in the gig economy.
  • As of 2018, 21% of full-time independents earned more than $100,000.
  • Among U.S. employees, 26% say they are somewhat likely or likely to become a freelancer or independent contractor.
  • By 2027, more than half of American workers, 58%, will have some experience as independent contractors.
  • Of organizations around the world with more than 1,000 employees, 20% have a workforce that is made up of 30% or more of contingent workers.
  • Among business leaders throughout the world, 44% say the top socioeconomic driver of changes in industry is the changing nature of work and flexible work.

Help Gig Workers Deal with Their Financial Challenges

Contingent workers face a variety of financial challenges. Income is likely not steady and reliable, and the feast-or-famine nature of contingent work can lead to poor decision-making. It is imperative for gig workers to educate themselves in money management, from saving and investing to healthcare and risk prevention. Here, we examine just a few of their financial planning needs.

Business Financial Planning: Gig economy workers may need help determining how to invest in their businesses, how to allocate funds to marketing and growing their businesses, and how to manage routine business costs without taking unnecessary risks. Knowing when and how much to set aside for taxes is an important component, and gig workers may also need help managing business credit and other sources of business financing available to them.

Personal Budgeting and Saving: Without the safety of a reliable paycheck, gig workers need to put more money into rainy day funds. Work may fluctuate. Depending on the variables that affect an individual's income, freelancers will need guidance to proactively save and budget. Using credit cards and obtaining personal loans, whether for mortgages or auto loans, is another key aspect of proactive personal money management guidance.

Retirement Planning: Gig workers do not have employer-created 401(k) plans, but they do have options including solo 401(k) plans, simplified employee pensions and IRA accounts. Financial advice is essential in determining the right retirement planning tools for each individual.

Healthcare and Disability: Employed workers often have insurance coverage and health spending accounts available through their employers, but gig workers must often find solutions on their own. For workers below certain income thresholds, insurance plans available through the government marketplace ( are an option. Spousal coverage and COBRA are other options. Gig workers must also prepare for the possibility of illness or injury that would prevent them from earning an income with adequate disability coverage.

Where there is great opportunity, there is great responsibility. The future of the gig economy depends on the readiness of financial planners to enable contingent workers to focus on what they do best.

Learn more about UTPB's online MBA with a Concentration in Finance program.


CPA Journal: Financial Planning for Workers in the Gig Economy

Business News Daily: How to Invest as a Freelancer in the Gig Economy

Nation1099: How Many Freelancers Are There?

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