"Gig economy" is a buzzy phrase that's picked up quite a bit of steam in recent years, probably because it's such an accurate way to describe the modern workforce. The truth is that fewer people are relying on one sole source of income, instead opting for side hustles to pick up the financial slack. Last year, CareerBuilder reported that roughly 32 percent of American workers had side gigs, up from 29 percent in 2016.
What's more, one 2017 report put out by the Freelancers Union and Upwork predicts that over the next 10 years, the bulk of the American workforce will be freelancing in one way or another, whether that's full time or on the side. While 9-to-5s aren't going anywhere, side gigs represent a great way to diversify your income and earn a little extra cash—ultimately helping you reach your financial goals faster.
Thinking about getting in on the gig economy? Here's how to supplement your income by freelancing on the side.
Revamp Your Budget
Making a realistic monthly budget is the first step toward financial security. If you haven't already done so, sit down and organize all your expenses to really understand your outflow of money. Tracking your expenses for a month or so can be eye-opening—what we think we spend and what we actually spend are usually two very different things.
Now take your regular income into consideration. Seeing the numbers in black and white should bring things into focus pretty quickly. Are you earning just enough to cover your bills, but not really moving the needle on financial goals like paying down debt? Or, worse, are you running in the red (in other words, do your your monthly expenses exceed your take-home pay)? If this is the case, you're likely reaching for credit cards to bridge the gap.
To make your budget as lean as possible, cut out any areas of wasteful spending. Some powerful money-saving tips include adopting a predominantly cash-based spending system and negotiating everything from your cable bill to your credit card interest rates. You can also dramatically slash your spending by refinancing high-interest student debt with a lower-rate loan. (Use this handy refinancing calculator to get an accurate idea of just how much you can save.)
Build an Emergency Fund
Establishing a solid financial safety net is Personal Finance 101. In practical terms, it means building up a liquid cash reserve that you can easily tap should disaster strike. Having this cushion will be your saving grace in the event of an unexpected job loss or other financial hiccup.
An emergency fund is crucial to breaking the debt cycle and getting on stable financial ground. Aiming to save up at least three to six months' worth of expenses is a good target, but this may feel like a long shot if you're working on one income. Enter side gigs, which can help you cross the savings finish line much faster.
Freelancing can take many forms and is far from a one-size-fits-all endeavor. Are you looking to simply pick up additional work on the side or transition to full-time self-employment? Put it another way: is your motivation some extra money or a full-on career change? If it's the former, there's no shortage of lucrative side gigs out there. The experts at Side Hustle Nation spotlight everything from teaching English online to renting a room on Airbnb to driving for a delivery service.
Whether your goal is 100 percent self-employment or just earning extra cash on the weekend, putting yourself out there is key. This is how you get inbound work (clients approaching you with offers, not the other way around). Marketing yourself as a freelancer may involve optimizing your LinkedIn profile and website, using social media wisely, and networking both digitally and in person. Put yourself in the position of your ideal client. What are their needs, and where are they looking for qualified workers? You'll have a tough time securing side gigs if potential clients can't find you. One upside is that any money you spend on business expenses, like business cards or web hosting, is often tax deductible.
In theory, you could set up your budget so that your regular income covers your monthly bills, and your side-gig cash funds your financial goals—like shoring up that emergency fund. Just keep in mind that you still have to pay taxes on any money you earn on the side. If it isn't taken out of your earnings automatically, like it is with a regular paycheck, make sure to set aside additional funds for tax payments. (Here's how the IRS breaks down the details.) This ensures you won't have any big surprises come tax time.
We're living in the best day in age to up your income by freelancing on the side. The other piece of the puzzle is reducing your expenses. Doing these two things together could really supercharge your financial life. Saying so long to high-interest student loans doesn't hurt, either.