Thirty-six percent of U.S. workers participate in the so-called gig economy. That includes everyone from online platform workers — selling items on eBay or Etsy — to drivers for Uber or Lyft, to contract nurses, to those who take a temp job, according to a 2018 Gallup poll. It’s basically all people who work outside a traditional full-time or part-time job.

Gallup says its data shows “a tale of two gig economies.” There are independent gig workers and then there are temporary or contingent workers. Independent gig workers, being their own boss, enjoy more flexibility and freedom, Gallup notes.

Contingent gig workers work like traditional employees, but they don’t enjoy the same benefits, pay and job security. “Supporters claim the gig economy is a trend toward worker empowerment and entrepreneurship, while critics worry it signals the deterioration of the social contract between employees and employers,” Gallup says.

Increasingly, even workers with full-time salaried jobs are relying on side hustles. Nearly 1 in 4 Americans earn money from the digital-platform economy, according to the Pew Research Center. You might rent your home or apartment through Airbnb. You might be a freelance writer or contract employee.

Where once a side hustle was what someone did while between steady 9-to-5 jobs, many people have now decided that the gig economy is the way they want to work. Or because of a job loss, it’s the only work they can get. But the hard reality is, whether out of desire or necessity, it’s important to figure out whether you can live well enough on income earned in the gig economy.

Here are some answers to common questions faced by workers who by choice or necessity find themselves working in the gig economy.

I’m worried that I may be laid off. How much can I earn working a side gig?

The San Francisco-based loan provider Earnest looked at the earnings of gig workers based on tens of thousands of loan applicants. The big takeaway from the survey: 85 percent of side-gig workers make less than $500 per month. The standout was Airbnb hosts, who make on average $924 each month. TaskRabbit workers came in second, earning $380 per month. Lyft and Uber drivers make an average of $377 and $364, respectively. As you can see from these numbers, it will take a lot of hustle to earn enough to cover your monthly expenses.

These jobs can make a difference for your financial picture. Just don’t overestimate how much you can earn in the gig economy.

Should I quit my full-time job to work my side gigs?

Even with the irregular income, it may be tempting to give up a traditional job for the flexibility of a side hustle. You work when you want to work. You take the jobs you like or, realistically, the ones that pay the bills.

But it’s important to note that workers in the gig economy often don’t have benefits such as health insurance, sick leave, overtime, workers’ compensation or access to a workplace retirement plan with perhaps a matching contribution from an employer. On this latter point, you can certainly still save for retirement even if you don’t have a 401(k) or similar employer-sponsored retirement plan. However, surveys show that people save more when encouraged by an employer.

You know this already, but I have to say it. Hustling is a key part of being a self-employed or gig worker. Even if you have a good gig or contract, you need to be constantly looking for the next one. You are selling yourself, and you’d better be good at it.

How do I manage my budget when my income fluctuates?

You need to become very disciplined with budgeting. The principles of money management aren’t vastly different; you just need to devise a system for handling your irregular income.

This is the system I recommend:

Set a baseline for expenses. The key to managing money when your income goes up and down is establishing a baseline of how much money it takes to run your household. Ask yourself, at a minimum level, how much you need to pay for the essential and important things every month — rent/mortgage, transportation, utilities, food, insurance, cable, etc. You can build in some frills, but you must be prepared to cut them out if you don’t earn enough to cover all your necessary expenses in a month. Total up the monthly expenses and you’ll have a good idea about how much you need to earn at a minimum.

If you have expenses that are not due every month, such as an annual or semiannual insurance payment, just divide the yearly amount by 12 and include it in your budget. For example, if your car insurance is $1,200 a year and you pay it annually, your monthly budget should include $100 to be saved exclusively for this expense.

Budget from a main household account. Establish a checking account from which you pay all your monthly expenses.

Create a “sweep account.” Deposit all your earnings from your side gig into one account. It is from this account that you will sweep out to the main household account the amount you need for your monthly budget.

Don’t splurge on your good months. It’s so tempting during the higher earning periods to go hog wild doing things you couldn’t do when money wasn’t coming in at the same level. This is probably the single biggest mistake people with side gigs make.

Set up a tax account. Finally, you absolutely need to make sure you are subtracting and saving the money for income taxes (federal and state). Do it as soon as you are paid if taxes aren’t withheld. So many people have come to me distraught because they have been hit with a huge tax bill and penalties.

*By Michelle Singletary, Washington Post*

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