I’m a Non-Traditional Worker with No Company Benefits. How Can I Be More Financially Secure?
4 minute read
For many people, earning a living means getting a job at the best company you can find so you can earn a steady paycheck and also receive employer sponsored benefits like health insurance and a 401k. A “traditional” path. But what if you choose to forge your own path and become self-employed? Recent surveys report that in 2021 the U.S. had over 51 million independent workers, a huge increase from 38 million in 2020, and making up close to one third of all workers in the U.S. (2021 State of Independence Study). Interestingly, well over half of the new growth comes from women. If you are one of these “non-traditional” workers – an artist, freelancer, micropreneur (employing fewer than four people), gig-worker – you know your income can be unpredictable. This month’s income may be nothing like your prior months and can often be in up-down cycles of large bursts followed by periods of no income.
How do you create enough stability with your finances, so you are able to manage your fixed and variable costs? How do you manage to save enough to also handle both life’s surprises and your eventual retirement? The good news – like any financial formula, once you do some number crunching and identify basic inputs like income and expenses, you have a foundation built to start effective financial forecasting.
WATCH Your Money Map: Stable income for nontraditional earners
Live for today, and peace of mind for tomorrow
As a non-traditional earner, you may have a lot of freedom to choose the jobs and projects you want to work on and who you want to work with. But, because your income can fluctuate, you should be creating a mindset of both short and long-term financial security. The first step is taking a hard look at your expenses. To get this baseline, it is important to look through at least six months of your spending and break it down into three key areas – fixed/essential expenses, those things you have to pay for like rent, car payment, or a mortgage… variable/discretionary, things like food and entertainment, and miscellaneous/annual, like insurance. When predicting your income, it helps to be as honest with yourself as possible. Ideally, you have a number of years to analyze, but no matter how many, map out the flow vs using an average. Do you have a recurring stream of income from a predictable project? Or is your income varied? Knowing these inputs can help you stick to a commitment of savings.
Also, Behavioral Finance research teaches us a lot about our habits around money. For example, you will always have unexpected, but frankly, predictable expenses (car repairs, sick pet, etc.). Setting up a “planned savings” account vs an “emergency savings” account can reduce your anxiety. Extreme examples like the COVID-19 pandemic are a reminder why having strong personal finance habits are critical. Lockdowns, postponements, and business closures put millions of workers in the entertainment world out of work for over a year, many without a savings safety net. Having a mindset to set aside planned savings and wealth savings (long-term and/or retirement) can put you in a better position to ride out these episodes and also set yourself up for a time when your savings will pay you. Having a secure retirement is within reach with proper planning. As a non-traditional worker, it’s a must-do.
From scarcity to abundance
Actor Miata Edoga noticed this gap in her life twenty years ago. She also realized that many of her fellow artists also lacked the knowledge to manage their financial lives (fewer than half of the states require a class in personal finance to graduate high school). Fueled by a strong belief that financial education empowers people to live abundant lives, she decided to launch her company, Abundance Bound. Her work is built around the idea that when you have a healthier, more compassionate relationship with your money, you have more time, energy, and freedom to focus on your creative careers and artistic pursuits. Miata shares these key tips with her non-traditional earners, especially ones who want to focus on their retirement:
- Knowing where you stand financially is the first step. Understand your income, debt, savings, and tax rate.
- A basic budget worksheet can be a great way to start.
- Analyze six months of your expenses to get an average monthly cost.
- Analyze as many years of income to determine the patterns. Try NOT to use an average.
- What are your professional dues? Union, Certifications, Classes, Insurance? Will you need to pay them monthly? Quarterly? Yearly?
- Keep track of any receipts or recurring expenses for tax purposes and cash flow.
- Set up three accounts for your money: planned savings, wealth savings, and miscellaneous spending.
- Work with a financial professional who understands your financial situation and your goals.
- Determine what kind of retirement you want to live, and what your expenses will be.
- What are your sources of income in retirement besides Social Security?
- Protected income can be especially helpful for non-traditional earners who want predictable income in this phase of their life.
- Visit protectedincome.org to get advice, information, and practical steps to learn more about different ways you can feel more secure in your retirement.
Miata Edoga is the CEO and Founder of the financial education company, Abundance Bound. For almost two decades, she has been helping non-traditional earners of all kinds – artists, freelancers, small business owners, gig economy workers and other multi-hyphenates – learn how to effectively manage the ups and downs that come with being an independent worker, establishing a healthier, more compassionate relationship with their money. She created The Artist’s Prosperity System, which has provided thousands of performers and artists with a specific, step-by-step process to significantly improve their financial situation, providing them with more time, energy, and freedom to focus on their creative careers and artistic pursuits. Fueled by a strong belief that financial education empowers people to live their very best lives, Miata has shared her signature talks, seminars, and workshops at conferences, schools, companies, and organizations around the country.