I’m Doing Gig Work: What You Need to Know
If your main job isn’t providing enough income to meet your financial goals — whether that’s saving for retirement, buying a home, or just covering day-to-day expenses — you might be considering gig work as a way to earn extra cash. While side hustles can be a great way to supplement your income, there are some key financial and tax considerations you need to keep in mind before diving in. Let’s take a closer look at how gig work can impact your finances and what you should know.
Taxes and Insurance Concerns
One of the first things you should know about gig work is that, for tax purposes, you’re treated like your own business. This means that even if you’re working casually as an Uber driver or delivering food with DoorDash, you’re still responsible for your own taxes and insurance.
When it comes to taxes, you’ll need to handle federal and state taxes (if you live in a state that has income taxes). In some states, gig workers are classified as employees, so be sure to check your state’s rules to see how they affect your tax situation. You’ll also be required to make quarterly estimated tax payments. These are due in January, April, June, and September. If you miss a payment or don’t pay enough, you could face penalties from the IRS. Working with an accountant can help you determine how much you should be paying and ensure that your yearly taxes are filed correctly — especially when you’re juggling multiple jobs.
But taxes aren’t the only concern. If you’re using your own vehicle for gig work, like driving passengers or delivering food, your auto insurance likely won’t cover you in the event of an accident while you’re working. You’ll need to add a commercial rider to your auto insurance policy to ensure you’re protected while on the job. Depending on the nature of your side hustle, other types of insurance may be necessary as well. For example, if you’re running a cleaning business, you might need to be bonded and insured in case any mishaps occur.
Certain states have additional requirements for side gigs, too. For example, in Connecticut, you need a home business permit even if your business is entirely remote. If your side hustle involves providing services like handyman work, you might need a contractor’s license and specialized insurance. Plus, if you’re parking a commercial vehicle at home, you’ll need to check your local zoning laws to ensure you’re in compliance.
Business Financial Management Considerations
One of the most important steps to managing a side gig or small business is keeping your personal and business finances separate. This could mean opening a separate checking account for your business funds and using a separate credit card for business expenses. This separation isn’t just about organization — it’s also a chance to maximize your savings and reduce taxes. For example, you can contribute to a Solo 401(k) to save for retirement, even if your only income source is from gig work. Plus, you can write off business expenses come tax season, reducing your taxable income.
Dr. Jay often recommends the book Profit First: Transform Your Business from a Cash-Eating Monster to a Money-Making Machine by Mike Michalowicz. It’s a great resource if you’re starting your own business or doing gig work and want to make sure your financial house is in order.
Another important consideration if you’re doing gig work, or thinking about starting your own business, is disability insurance. If you’re injured and unable to work, disability insurance can help you stay financially stable during that time, which is crucial for any self-employed individual.
Why Gig Work Works for Many in the Childfree Community
Dr. Jay has found that many in the Childfree community are drawn to gig work or running small businesses because it allows for more flexibility, financial independence, and control over their work-life balance. Whether you’re building a business or picking up side gigs, it can help you create a stronger financial foundation and reach your goals faster.
However, it’s important to carefully consider the tax, insurance, and business management implications before diving in. With the right planning, gig work can be a valuable tool for financial freedom, especially when paired with expert advice.