Financial must-dos for independent contractors


Question: Rich in Bridgetown: I’m considering becoming an independent contractor so I can have more flexibility with my schedule. Any financial tips? 

A: You’re a part of a growing number of Americans who are working in the ‘gig’ economy. In fact, according to CNBC, there are now six million more of you than just 10 years ago. 

First up, address healthcare. If you’re married and your spouse has coverage, consider joining that plan. Other options include buying coverage through the Affordable Care Act athealthcare.gov or buying private insurance. 

Second, make sure your emergency fund is sufficiently funded – but toss the usual ‘three to six months’ worth of living expenses’ rule out the window. Anyone who is self-employed with an inconsistent income should instead aim for at least nine months’ worth. This cash cushion can also help supplement lower-earning months. 

Third, set aside money every quarter for taxes. And don’t forget, you’ll be paying the full 15.3 % FICA tax for Social Security and Medicare.

Fourth, you still need to make retirement a priority. Self-employed workers actually have multiple options for saving for the future, including a SEP IRA, SIMPLE IRA, and a Solo 401(k).  

And finally, make sure you accurately report all income. If you happen to under report, your future Social Security benefit at your Full Retirement Age will be lower than what you’re likely expecting.

The Simply Money point is that numerous financial responsibilities will lie squarely on your shoulders if you go this route. Consider visitingfreelancersunion.org for more resources.