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Thanks to technology like smartphones and mobile apps, it’s never been easier to start your own business or participate in the gig economy. From delivering food to renting properties, and creating online content, nearly 700,000 Canadians found work through digital platforms in 2024.1
But the gig economy is characterized by short-term, irregular employment that doesn’t guarantee a steady stream of income. An unpredictable paycheck can make it harder to budget and deal with your personal finances.
If you are a freelancer or gig worker, keep reading for advice on irregular income budgeting, managing debt, and where to find self-employed debt help in Canada.
Create a budget
As a gig worker, your income likely changes from month to month, but your living expenses should stay the same. Creating a budget can help you determine how much money you need to pay your bills every month.
Calculate your expenses
Start by calculating your fixed expenses, which include costs that generally stay the same each month. For example, your mortgage or rent, utilities, insurance, and debt payments.
Next, add up your variable living expense; these are items that change over time. For example, your groceries and gas. Adding your fixed and variable expenses will provide an estimate of how much money you need each month to get by.
Calculate your income
To calculate your average monthly income, add up all your sources of income for a year and then divide it by 12.
If you’ve only been in the gig economy for a few months, use your lowest monthly income as your estimate. This way, you don’t overestimate your income when creating your budget.
If you find your expenses are more than your average income, you’ll have to figure out ways to cut your budget or make more money.
Grow an emergency fund
An emergency fund is a pool of money that you set aside for unexpected expenses, like a car repair or job loss. While an emergency fund is a good idea for everyone, it’s especially important if you’re self-employed.
If you have a low income month and don’t make enough to cover your expenses, you can turn to your emergency fund to fill in the gap. This can help you avoid more expensive borrowing options, like a credit card cash advance or a payday loan.
Set aside money for taxes
In a regular job, your income tax is taken off your paycheck automatically. If you’re self-employed, you’re responsible for tracking your income and paying what you owe.
Make sure you’re setting aside money each month to cover your taxes so you’re not overwhelmed at tax time. Once you owe more than $3,000 in net taxes, you may have to pay your taxes in quarterly installments. If you have questions about your taxes, consider speaking to a professional.
Diversify your income
If you only have one source of income, you’re putting yourself at risk. The loss of one client, or one gig, can eliminate your entire income stream.
Diversifying your income by having multiple side-hustles or a full-time job plus a side hustle can help reduce your risk. If you’re a freelancer, having multiple clients across different domains is another way to diversify.
Manage your debt
Being self-employed comes with many benefits, like managing your own schedule, but it can also come with added stress and extra risks. As a gig worker, a few slow months might cause you to fall behind on your bills and accumulate debt. If your debt starts to feel overwhelming, you have options.
A Licensed Insolvency Trustee (LIT) is a debt expert. They offer the widest range of debt help options, and are the only professionals in Canada who can administer federal debt-relief solutions like a Consumer Proposal and Bankruptcy.
Consumer Proposal
In a Consumer Proposal, you work with a LIT to create an offer to your creditors to reduce your debt payments, extend the time you have to pay, or both.
Your LIT can structure the Proposal in a way that accommodates fluctuating income, which is especially helpful for gig workers.
In a Proposal, you have up to five years to repay your debts, and unlike in Bankruptcy, you get to keep your assets while making your payments.
Bankruptcy
If you can no longer afford to pay your bills, filing for personal Bankruptcy might be an option to help you regain control.
While declaring bankruptcy can feel scary, the purpose is not to punish; it’s to give you a fresh financial start.
During the Bankruptcy process, your LIT may sell some of your assets to raise money for your creditors. This doesn’t mean you’ll lose everything, as there are provincial and federal exemption laws that protect certain assets in each province in Canada. When you’re discharged from Bankruptcy, you’re released from your legal obligation to repay most of your unsecured debts.
Find Self-Employed Debt Help in Canada
If you’re a gig-worker, a freelancer, or self-employed, you’re aware of the challenges that come with an irregular income. Whether it’s navigating a slow season, dealing with clients who pay late, or trying to understand your taxes, there’s a lot to learn and manage. If you’re also dealing with debt, you might start to feel overwhelmed. But you don’t have to deal with debt alone. If you are self-employed and require debt help in Canada, we can help.
Give us a call at 1-888-371-8900 for a free, no-obligation consultation or complete our online contact form. Our experts will review your finances and help you find a path towards debt freedom.
