Entrepreneurs

How to navigate the profits and pitfalls of the gig economy

By: Stephanie Hughes on February 13, 2020

The working world has changed a lot in recent years. Ask any of your friends if they have a side hustle on top of their full-time job and many of them will probably say “yes.” In fact, for some of them, their employment is probably exclusively made up of side hustles or a mosaic of freelance jobs that make up the “gig economy.”

The gig economy is the term used to describe temporary and flexible work arrangements. If you ever drove for Uber, wrote an article for a blog, or picked up some random labour gig on TaskRabbit, you’ve participated in the gig economy. This style of employment has quickly become a very popular way to make money, particularly for younger, internet-savvy younger generations who tend to shoulder higher debt loads with lower-income entry-level jobs.

A 2019 study by the Angus Reid Institute found that men and women between the ages of 18 and 34 were most likely to be involved in the gig economy. When asked if they were either currently in the gig economy or had done gig work in the past five years, 42% of surveyed men said they’d taken part. For women, this figure rose to 45%.

Many people get into gig work to keep up with mounting expenses that their full-time job alone can’t cover. Others prefer the flexibility that this arrangement allows and will do this kind of work instead of a stable full-time job. Whatever your reason for getting into gig work, it can be a good way to establish some extra income – as long as you know what you’re doing. 

How to get ahead of the gig

Starting off, you want to find a gig that’s a good fit for your talents. Hopefully, you can find a side hustle that you’re passionate about. Many people turn their hobbies into businesses if they have a craft they enjoy making or a trade they ply. You might not find the perfect, most fulfilling gig job, but the idea is to find something to do on the side that doesn’t make you miserable and provides you with a bit of extra income.

It can be tempting to fall into any gig that promises to make you money. One example is multi-level marketing schemes, or “MLMs.” Be careful with these kinds of “businesses” that use pyramid marketing strategies to recruit non-salaried workers to buy and sell company products and recruit others to work under them. Do your research, and don’t just take any opportunity.

Once you’ve decided on your gig, you’ll have to establish a strong client base. This tends to be inherent for ride-sharing drivers or food delivery couriers, but if you’re a freelance writer or graphic artist, you’ll have to start networking. A lot of people make the mistake of making a connection with only one or a handful of clients to cover the bills. But the problem with not building out a  broad and diverse client base is that if one (or more) of your clients decide that they no longer need your services, you’re going to lose a lot more income. Imagine having only one client that provides the bulk of your income suddenly ending the working relationship – now you have no cash flow.

This is where you need to be tactful in your networking and work with as many different clients as you can. Create a portfolio to promote your work and stay in the public eye. And always be open to new clients and opportunities – it’s a good way to get your foot in the door for future job opportunities. 

Taxes and expenses

Because being in the gig economy is a lot like operating your own business, it also means that you’ll have to shoulder a few start-up expenses. For example, if you’re driving for Uber, you’ll need a properly maintained and insured vehicle. Many people make the mistake of getting carried away with expenses without considering whether or not the pay justifies the cost. Make sure you’re keeping track of all of the necessary accounting on an Excel spreadsheet (or whichever system works for you) so you’re not in the hole every month.

Keep track of the income you make from each job and client. This will be essential during tax time. Unlike with regular salaried jobs, your income tax isn’t automatically deducted. You’ll either need to learn how to do your own accounting or hire an accountant to help you file your income taxes. Instead of receiving a T4 from an employer, you’ll need to fill out your own T2125, available on the Government of Canada’s website. Working a full-time job as well as a side hustle might also knock you into a higher tax bracket, meaning you could get hit with another tax liability that you weren’t expecting. Make sure you’re keeping track of your total taxable income and setting enough money aside so you’re not penalized. 

The bottom line

It may be tempting to pick up every shift, every project – anything to keep money coming in. But it’s very easy to burn out when you’re balancing multiple jobs. You need to establish a routine and have realistic expectations of how much work you can take on. Because once you hit that frazzled-out phase, you won’t be getting any work done at all. 

A side hustle can be a great way to supplement income or work your own hours. Just make sure you’re working the gig economy and that the gig economy isn’t working you.

 

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