Women who work in the gig economy—whether full time or as a side hustle—rarely receive a steady income. Fluctuations in pay make it challenging to save for the future, the one where you buy a two-family in Somerville, Massachusetts, or go on that bucket-list vacation to Marrakech, Morocco. So how do you set aside money when you can’t predict when you’re getting your next check or how much it will be?
Jennifer Lane, a certified financial planner and owner of Compass Planning Associates, with offices in Boston and Wellesley Hills, tells Exhale that the best and most obvious thing you can do is to cut expenses. “One of the main important things is budgeting and having careful tracking of expenses,” says Lane. “You have to be very self-aware of your spending.”
Cutting expenses can mean making some hard decisions, such as taking on a roommate or trading your car for public transportation. Consider reducing your living expenses to fit within the least amount of income you expect in the upcoming year. To help with the process, Lane recommends working with a close friend or partner to track expenses together. Having another set of eyes keeps you accountable, and your friend may see trends in your spending that you’re not able to recognize.
Even if you start saving in small ways, every bit helps. Lane calls this practice “snowflake savings.” “Snowflakes are small things that accumulate really fast,” says Lane. “People in the Boston area really understand that.”
An example of snowflake savings would be lunch during the workweek. If you bring your lunch, you avoid paying $10 for takeout, saving you about $6 on your food cost. Lane says you should move that $6 into your savings immediately, otherwise it will get spent. A month of lunch savings adds up to about $140. And in a year, lunch savings could snowball to $1,600.
Another issue Lane says to be mindful of is the “treat yourself” attitude. “‘Oh, I deserve this’ can be a black hole,” she says. Instead of splurging on a costly purchase, Lane recommends rewarding yourself with something less damaging like sleeping in an extra hour, going for a walk on a nice day, or watching a guilty-pleasure TV show.
In addition to saving for future purchases, self-employed workers must remember to set aside money for taxes. “A good rule of thumb when you’re starting is to set aside 40 percent of what you make. And that’s more than most people think of,” says Lane. She encourages setting aside so much because people often forget the hefty self employment tax. If you end up overpaying your taxes, you’ll get the excess back in April.
Though the IRS only requires freelancers to pay taxes on a quarterly basis, Lane says one of her clients paid her taxes monthly so she wouldn’t be tempted to spend that reserve.
Taking this conservative approach to taxes may mean you need to increase your income goal, then hustle to earn it. Lane suggests estimating the amount of yearly income you need to survive, then increasing that by 40 percent. You might have to pick up another client or five, but you won’t be caught off guard come tax time.
Apps That Make Saving Money Easy
These financial-planning apps put budgeting, saving, and investing at your fingertips. So now there’s no excuse for an empty piggy bank. Choose the advice and the app that sounds right for you and begin saving for a rainy day—or Tax Day, at the least.
Mint software from Intuit (maker of QuickBooks and TurboTax) can help you budget, track your expenses, and pay your bills. You can set monthly spending amounts for each category (utilities, groceries, going out, etc.), then monitor to make sure you’re not overspending. You can set goals and transfer money to savings, though this doesn’t happen automatically. Mint also offers credit score tracking.
A savings app works by being connected to your primary bank account then automatically transferring money into the app’s savings accounts until you need it. The Qapital app allows you to set specific savings goals and pulls money out of your bank account based on rules you create. For example, you might have savings goals for taxes, vacation, and the holidays. You can create a rule that says every time you deposit a paycheck, Qapital will automatically set aside 40 percent for Uncle Sam, three percent for travel, and one percent for gifts. You can also create individualized rules, such as rounding up purchases to the next dollar and saving the difference or saving an extra $5 every time you shop at Wegmans.
If you don’t want to bother setting rules for saving, the Digit app will do the work for you. Digit’s algorithm takes funds from your checking account based on your spending habits and your account balance. The idea is that you won’t notice periodic $5 or $10 withdrawals, but the savings will add up fast. Digit holds the money in a separate account so you won’t see it and be tempted to spend it.
Acorns not only helps you save money but also helps you invest it. By rounding up on purchases and saving the extra change, Acorns builds up an account then invests that money in low-cost exchange-traded funds, or ETFs. You can add more money to the account (or withdraw it) at any time. If you want your money to work for you but don’t have the time to research investments, this is a great way to start.