Being your own boss is among the most rewarding steps you can take in your career. The gig economy benefits those who want to set their own hours, and take time off whenever without asking. For many, this is the dream. The only caveat is that every expense your employer would be responsible for is now your responsibility: insurance, equipment upkeep, and tax planning. Additionally, you no longer get any paid time off so you have to plan your finances accordingly for parental leave, sick days, and vacation days.
The types of financial services you need as a self-employed person will vary depending on the type of work you do. Do you source your own clients, or find them through a website or an app? Do you have multiple sources of freelance income coming in? Do you often have to purchase materials that count as business expenses? While you can probably get away with using a personal bank account for freelancing, the more complex your business finances are, the more likely you are to benefit from a business bank account.
A separate bank account can help you keep track of your expenses, deposits, and total profit. This will help you down the line as it will be easier to calculate your median earnings, how much you should save for taxes, and how much you can write off as business expenses.
Our recommendation is to have a savings account dedicated to saving for income tax, and for periods you may be unable to work (sick leave, parental leave, caregiving, vacation, etc.) Put aside at least ¼ of your income for taxes, plus a little more for an emergency fund.
Gig economy loans aren’t always easy to come by if you’re self-employed. Many lenders are skeptical of self-employed income statements and apply extra scrutiny to loan application from freelancers. Even if you’re earning good money, jobs in the gig economy are perceived as less stable and independent workers are left with fewer options than their traditionally employed counterparts.
Getting affordable loans as an independent worker can be challenging given that often times the only option for borrowing money comes from predatory lenders who charge high fees. Your best option for borrowing money without breaking the bank is to choose a lender who specializes in gig workers and freelancers. Moves specializes in gig economy financial services to help them independent workers achieve their financial goals.
As an independent worker, you are responsible for looking after your own health insurance. If you became self-employed following a job where you had benefits, you may be able to repurchase the same benefits from the same provider for up to 90 days after the end of your coverage. You may also be able to get health insurance from a university or college, or by joining your spouse’s insurance plan. That said, if you’re in good health and you’re already covered by provincial health insurance, you may not get a lot out of private insurance.
If you are looking at purchasing health insurance from scratch, here are some things to consider.
Preventative care is often cheaper than emergency care in the long run. Don’t wait to see a healthcare provider – taking an afternoon off to see a doctor and getting medicine won’t impact your bottom line as much as having to go to a hospital if you experience a health emergency. Similarly, seeing a dentist for regular screenings and cleanings will save you from needing expensive dental procedures in the future.
Additionally, you can improve your earnings efficiency in some jobs by keeping your health in good shape. If your business requires you to interact with people, having a healthy appearance will work to your advantage. Clear skin and a healthy smile can help you increase the amount of tips you earn if you’re making a delivery or are greeting a passenger. Taking care of your eyesight and wearing glasses or contact lenses can also help you if you are driving or spend a large portion of your day looking at a screen.
If there is a risk of injury on the job, for example if you get into an accident while driving or delivering, you may wish to have private insurance for the peace of mind that you will have access to a physiotherapist.
You may also be able to write off health expenses on your taxes. Any out of pocket expenses you make on healthcare not covered by your province or insurance plan can be used as a tax credit of $2,352, or ~3% of your net income, whichever is less. While this may not seem like much, this is one type of financial support for freelancers that anyone can and should take advantage of.
If you do decide to purchase private health insurance, make sure you shop around for the best rate. If you are a part of an alumni association, you may be eligible for discounts with certain providers. Additionally, if you get health insurance from the same place you have another type of insurance, such as renter’s insurance or car insurance, you may also be eligible for discounts.
While many forms of financial support for gig workers will vary on the local level, there are plenty of support programs at the national level to help support Canada’s independent workforce. While some of the resources require you to be enrolled in Employment Insurance, independent workers are able to opt in to EI by contributing to EI premiums. Be sure to check each government resource for the most up to date information.
Benefits from Employment Insurance
This list of gig economy services is not exhaustive. Financial help for self-employed workers can be hard to come by but it’s there if you look for it. That’s why we’ve compiled a comprehensive guide, providing details on the gig economy and the future of work! Give it a read and let us know what you think.