One of the many realities we now face, especially in the post-COVID era, is a subtle shift from traditional employment towards the alternative gig economy. The gig economy refers to temporary or flexible jobs performed largely by freelancers, independent contractors, and self-employed people. Unlike traditional nine-to-five employment, gig work enables individuals to earn an income on a project-by-project case by offering services to single clients or companies without the strictures of long-term contracts. Online gig work, according to a World Bank finding last year, is growing globally, particularly in the developing world, and has been on the rise, driven by technological advancements that came on full display during the pandemic. With an estimated 435 million people around the world involved in this gig economy, the demand for these jobs has increased by 41 per cent between 2016 and the first quarter of 2023.

What this means for Jamaica

Jamaicans too, especially younger people, are leaning into gig work. They often opt for location-based skills like Uber or gigs that can be done remotely like web development and online tutoring. While gig work is attractive for those seeking flexibility, peace of mind, and the freedom to pursue their goals on their terms, it also comes with unique challenges. Top of the list is income instability. Gig work, while having the potential to generate good money, is very fickle. The unpredictable nature of gig work makes earnings volatile based on the availability of projects or clients and makes it difficult to devise long-term financial plans. Additionally, gig workers rarely have access to health insurance, paid vacation time, pensions, and other benefits that traditional workers have.

In addition to having a solid understanding of personal finances to manage your income, expenses, and savings effectively, you also need to contemplate your future. While gig workers can make good money, many struggle to manage their finances in a way that will see them make ends meet during periods of low tide because of limited financial literacy. They often forget to develop a financial plan that aligns with their circumstances. In a recent
TVJ News special report, local YouTubers spoke glowingly about the earnings from sharing videos online. However, how many were thinking long-term? They leveraged skills not taught by the formal education system and embraced easy money, but were they spending it wisely to build wealth? While being one’s own boss may seem liberating, gig workers should consider budgeting needs, tax obligations, saving and investment strategies, and other money management realities. This will help to ensure that they maintain financial stability, meet long-term financial goals, avoid unexpected financial pitfalls and ultimately, build wealth.

Budgeting needs

While it is difficult to create a budget if the job is tenuous, a spending plan can be made based on your average monthly income, fixed and variable expenses, and savings goals. This process will have a trial-and-error period, but begin with determining what you bring in. If you have more than one gig, include them all. Then figure out your basic needs, such as rent, utilities, and groceries. Next, track your variables, like transport, business-related expenses, and entertainment. In doing this, you will set realistic spending targets while identifying opportunities for saving.

Taxes

Remember, your gig income is taxable and it is your responsibility to file your tax returns accurately and on time. Paying taxes is mandatory; so ensure you know your tax obligations. It helps to keep detailed records and receipts of your income and business-related expenses, to help ensure compliance with Jamaican tax laws, minimise tax liabilities, and avoid potential penalties. If you need further guidance, speak to a licensed tax advisor.

Saving and investing strategies

Do not fall into the trap that says you cannot afford to save, let alone invest. Regardless of the job type, permanent or gig, the key to saving and investing is discipline and an understanding that your money can work for you. Gig workers should establish a savings or investment plan with short and long-term goals. Short-term goals may include building an emergency fund or saving for a specific purchase while long-term goals include developing an investment strategy or planning for retirement. A good saving strategy is to decide on a specific percentage of your income to set aside. You can do this by setting up a standing order to set up automatic transfers to a dedicated savings account. Having a sound investment strategy is a good way to inflation-proof the money you make now for the future. Even for gig workers, it pays to increase financial literacy as it enhances decision-making, minimises risks, and broadens the knowledge about various investment vehicles and options to create wealth. Determine your long-term financial goals and decide the investment vehicle that you will use to reap dividends. If this is overwhelming, speak to your NCB Capital Markets Limited (NCBCM) wealth advisor who will help customise a plan that will align with your risk tolerance and financial goals.

Gig work as additional income

If gig work is not your main source of income but rather a side hustle, it presents an excellent opportunity to bolster savings for substantial expenses such as your child’s tuition, car loan payments, or mortgage. Gig work can also provide a foundation for obtaining additional insurance coverage, which is an essential yet frequently disregarded tool for building wealth. Using gig income to supplement savings bolsters wealth accumulation by diminishing the reliance on high-interest loans, thereby safeguarding your financial objectives. The extra income from gig work will go a long way in helping you meet your savings and investing goals faster.

Retirement

According to the 2000-2022 Jamaica Population Health Status report, Jamaica’s elderly population has grown by 32.6 per cent since 2019. However, with only about 20 per cent of the workforce enrolled in a pension plan, there is a pressing need for better retirement planning and financial literacy to ensure financial stability in old age. This issue is particularly critical for gig workers, who often lack the safety net of insurance and pension benefits that come with traditional employment. Gig workers will need to be proactive and diligent in planning their financial future. The earlier they start to save and invest for retirement, the more compound interest works in their favour. The National Commercial Bank (NCB) provides seamless access to wealth management products and services. NCB Insurance Company for life insurance and the NCB SMART Retirement Plan are designed so gig workers, too, can be confident their financial future is secure.