How to Manage Your Money in the Gig Economy

A lot is eating away at our budgets: sky-high inflation, a possible recession looming on the horizon, and student loan payments resuming, for starters. While there's only so much we can cut back on with our spending, there's no limit to how much we can earn.

Enter side hustles. It's flexible, fun, and can help you cover a financial shortfall and keep up with the basics. According to research by LinkedIn, there are about 75 million freelancers in the U.S. Per Bankrate, on average side hustlers rake in $810 a month. Not too shabby.

For hardworking single parents like Builder Tara Jacobs (who you might remember from the Self podcast), taking on a side gig on top of her full-time job has helped her cover her day-to-day spending and not dig a deep hole. Tara is also using the money from her side gig to make sure she stays on top of her debt payments, which can help build credit.

But how can you manage your money when your income goes up and down each month? Here are some pointers on how to budget when you have multiple streams of income:

The importance of budgeting when your income fluctuates

When your income is inconsistent, it definitely can be more challenging to stick to your budget. If the amount of incoming cash fluctuates, it can feel like you're constantly trying to hit a moving target, or tend to your garden without knowing how much water you have to work with.

The funny thing? It's even more important to budget when your income goes up and down. If you're not watchful and come up with a spending and saving system, your bank balance might fall into the negative.

Budgeting basics in the gig economy

You might know the basics of budgeting on a fixed, regular income, such as understanding your budgeting style, jotting down expenses, and tracking your income and spending. As you might expect, when your income is variable it might feel like a nearly impossible task to budget. But let's go over some easy things you can do:

Tie your main bills to your regular income. Take it from Tara. As an IT help desk specialist she uses the money earned from her day job toward her main bills—rent, utilities, debt repayment, and child support.

That way, she doesn't need to worry about making the money from her main paychecks last until it's time to pay rent. "Most times, my money issues aren't so much how much money I have, it's the timing," says Tara. "There's no point in having $2,000 towards the 15th of the month if your rent is due on the first."

Tie money for variable expenses to your side hustle. Before she took on a second job as an Amazon Flex driver, Tara sometimes had difficulty making her paycheck stretch to the next paycheck. Now, she works anywhere from 15 to 20 hours a week. Another perk? She usually gets paid the next day.

While the money from her day job goes straight to her bills, the money from her second job is used to cover everything else: groceries, stuff for her son, and those little shopping splurges that keep her happy.

Before having a side hustle, Tara relied on her credit cards and payday advance to help her get by. Racking up debt and barely keeping up with the minimum payments put her in a debt cycle. “Which made my credit worse," she says. "Now that I don't have to touch credit, I'm like, 'Hey, I can use that for building credit.' I can also save. That's because I can use side hustle money to spend on whatever."

Track your income. See what's going in and out, and consider using a budgeting app. That way you can see how much you're raking in as a whole, how much you're spending from both your main job and side hustles. You'll be better equipped to make tweaks to your budget, and save for future you.

For instance, Tara uses a free money management app that helps her track balances, and pings her with alerts about any frivolous spending. "You can also try a budgeting spreadsheet," suggests Tara. “That way, you can track frivolous and unnecessary spending."

Keep track of business-related expenses. When you have a side gig, certain types of business costs for your hustle are eligible to lower your taxable income. Depending on your side gig this might include:

• Gas for your car if your side gig requires driving
• Car-related expenses as it relates to your business (i.e., maintenance, repairs, insurance premiums, registration)
• Rideshare car insurance
• Equipment, materials and supplies that you're paying out of pocket
• Office supplies
• Software you're paying for to do your job

Hold onto receipts, and use an expense tracker or bookkeeping app, which will help you save time during tax season trying to locate this information.

Something to keep in mind: You owe federal and state taxes on money you bring in for each side hustle. If you earn money for gig work, you might owe quarterly estimated taxes. You'll want to stash a portion aside of income from your gigs for tax purposes. A tax professional can help you figure out exactly what's deductible and exactly when you should pay.

Save for the future

Tara's future goals include getting full custody of her daughter, launching her own small business that provides a support network for fellow single moms, and learning new skills such as American Sign Language and code Python. Another small business idea Tara has brewing? Opening a restaurant.

How can you save when your core focus is on your immediate needs and expenses? Consider paying yourself by putting a small percentage of your take-home pay from side hustles. To make it easier, automate your savings, even if it's just a few dollars a week.

Everyone's path toward financial wellness is unique. For Tara, she's managed to work toward her goals by juggling different demands and priorities in her personal and professional life — and having faith. "I give glory to God for helping me through," says Tara. "I wouldn't have made things possible without him in my crazy life."

Budgeting on inconsistent income is doable. Coming up with a master plan, system, and adding your spin to it can help you manage your money and direct it toward your needs, wants, and goals.

After years of trying different side hustles, and bending to side gigs that ended up not being worth the squeeze, Tara suggests to fellow gig workers to find a hustle that's a good fit for your schedule, needs, and lifestyle. "When you get in the mindset that there's always a way, you just have to be resourceful and ask questions," says Tara. "Don't fit your life into opportunities. Find opportunities that fit your life."

About the author

A personal finance writer for over 8 years, Jackie Lam covers money management, lending, insurance, investing, and banking, and personal stories. An AFC® accredited financial coach, she is passionate about helping freelance creatives design money systems on irregular income, gain greater awareness of their money narratives, and overcome mental and emotional blocks.

Her work has appeared in publications such as Bankrate, Time's NextAdvisor, CNET, Forbes, Salon.com, and BuzzFeed. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award, and a two-time Plutus Awards nominee for Best Freelancer in Personal Finance Media. She lives in Los Angeles where she spends her free time swimming, drumming, and daydreaming about stickers.

Editorial policy

Our goal at Self is to provide readers with current and unbiased information on credit, financial health, and related topics. This content is based on research and other related articles from trusted sources. All content at Self is written by experienced contributors in the finance industry and reviewed by an accredited person(s).