I’ve spent a lot of time over the past decade or so pointing out the personal finance challenges raised by the gig economy, which is a euphemism for temporary or freelance work. That means no benefits, no job security and no pension or group RRSP to help with retirement saving.
But whether by necessity or preference, a lot of young adults in particular work in the gig economy and do fine. One of them is Sachi Lovatt, a Toronto-based actress whose recent work includes a role in the TV series The Handmaid’s Tale and narrating the Penguin Random House audiobook Speak, Okinawa.
Ms. Lovatt got in touch recently to say she’s enjoying the Stress Test podcast I’m doing with Globe personal finance editor Roma Luciw, and to suggest some topics related to gig work. I decided to ask her to tell us more about managing your finances as a gig worker. Here’s a Q&A we did by e-mail:
Q: What can you tell us about the stresses and benefits of being a freelancer with an income that varies month by month and year by year?
A: The stresses – it is challenging to make a budget, stick to it and meet savings goals without ever knowing how much I will earn. Although I now always earn enough to pay my bills, that wasn’t always the case in the beginning of my freelancing career, which was stressful. I seldom take vacations because if I don’t work I don’t get paid.
The benefits – there is no income cap; sometimes I earn three times as much as a normal month. Some months I earn more than my spouse, who has a full-time salaried job. I can work as much or as little as I’d like. If I take time off, I can easily earn money again when I return; there is no job hunting required, just reconnecting with old clients. I make my job work around my life, not the other way around, which for me is priceless.
Q: How much is in your Plan B fund for emergencies such as a lengthy period between gigs, and how long did it take to get there?
A: I have the security of a spouse who has a full-time job, and our emergency fund is $3,500. We used to have $15,000 in savings, but recently put $11,500 of that toward our debt. I never have lengthy periods between gigs because I have diversified: I have multiple freelance jobs in addition to my main profession as an actor. The pandemic made it evident to me that there is actually quite a bit of financial security by being a diversified freelancer. I earned more money during the pandemic than before it.
Q: How often do you find yourself drawing down on your Plan B fund?
A: A few years ago I drew upon it every few months, as we had just moved countries and had no jobs. Since being more settled, I rarely touch the Plan B fund. The last time I did was when we moved about a year ago. I borrowed from our savings to pay for the first and last month’s rent, but was able to pay myself back (i.e., replenish the fund) quickly.
Q: How do you balance keeping your Plan B fund topped up and saving for retirement?
A: I recently read Dave Ramsay’s book, The Total Money Makeover, and have started following his step-by-step guide. As a result, I am aggressively paying off debt, then will be saving three to six months’ worth for an emergency fund, then saving/investing for retirement. My eventual goal is to live off half my income and to invest the other half.
Q: What’s your system for making sure you can pay the income taxes you owe?
A: For every paycheque that is not taxed at source, I immediately put 15 to 20 per cent of it into a TFSA. I only use it to pay off my tax bill once a year, and anything left over I add into my savings. I keep track of all my income, expenses and money set aside for taxes in a spreadsheet.
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Rob’s personal finance reading list
Forgive, but not forget
Accident forgiveness is a worthwhile vehicle insurance feature because it protects you from a premium increase if you have an at-fault accident. Here’s a useful primer on how accident forgiveness works, with Ontario used as an example, and here’s some information on how much your insurance premium could rise if you have an at-fault accident.
Pandemic puppy budgeting alert
I was out for a walk with my wife the other day and we saw a way cute, big-eared beagle puppy in a neighbour’s window. In summer 2021, the pandemic puppy trend is still going strong. Here’s some guidance on the cost of dog and cat ownership from a debt counselling agency, including thoughts on the value of pet insurance.
Hot credit card offers
Stephen Weyman of CreditcardGenius says these credit card new client bonus offers are the best he’s seen.
Tax traps for real estate investors
A tax and estate planning experts looks at two cases where real estate investors mistakenly conclude interest paid on their mortgage is tax-deductible.
Today’s financial tool
Bond yields – the interest rates paid by government and corporate bonds – have been on the rise this year. The Bank of Canada website is a handy place to track what’s happening with bond yields.
The money-free zone
I’ve been enjoying the new album by the British band Wolf Alice – it’s titled Blue Weekend. Here’s the song that got me interested in the band – Planet Hunter, from 2017. Planet-size hooks.
ICYMI: What I’ve been writing about
- Canada Pension Plan not paying full benefits to recent retirees due to systems delay
- Anger about soaring house prices could influence Canadian politics, civility between generations and even mental health
- A lot of investors are headed for disappointing returns in the years ahead – here’s why
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.