How to help clients with unstable incomes

Call it the job churn, gig economy or freelance nation. With the latest Canadian job-growth figures largely attributed to part-time work, the labour landscape is in the midst of a shift that has created a growing class of workers in need of financial guidance.

Many of those working in the gig economy rely on a string of short-term contract or freelance jobs they cobble together to make a living. Those working in the gig economy may contend with a feast-or-famine situation — periods where they’re flush with cash from a project, or times where income streams have run dry.

As financial planners, the challenge boils down to helping these clients instill the type of saving habits that make it possible to weather the instability of the job market, says Chris Enns, financial planner and personal-finance blogger at Rags to Reasonable in Toronto.

“Saving is difficult but not impossible,” Enns says. “[Financial] stability is one of the biggest things you can invest in as an artist or small-business owner.”

Enns shares his approach to working with earners stuck in the gig economy:

1. Scrap the budget template
When working with self-employed clients, it’s not a matter of slotting different portions of their income into a standard spreadsheet, which plots out monthly expenses. “People tell you to write down what income you make, but that changes from month to month,” Enns says. “Sometimes, they’re balancing four, five income streams.”

Effective income planning can look much different, he says. You have to build flexibility into the clients’ balance sheets, by going over different sources of income and perhaps setting different saving targets for each month, depending on how much money is flowing in.

2. Address tax liabilities
It took hitting rock bottom for Enns to take control of his own finances. An opera singer and artist by trade, Enns found himself on the hook for paying more taxes than he had anticipated. Now, he uses the “fear” of the Canada Revenue Agency to urge clients to be disciplined savers.

For example, he gets them into the mental habit of treating their earnings as belonging partly to the government, and partly theirs to keep. In his conversations with clients, he places a lot of emphasis on proactively setting aside money they can dip into come tax season.

3. Plan for both lean and fat times
Many clients who find their way to Enns are either planning for a major life change or are sick of the stress that comes with juggling their finances from month to month.

To help overcome clients’ anxieties about planning for an uncertain future, you have to account for unforeseen expenses — and earnings — that could derail or boost their prospects. Just as you would encourage other clients to set up an emergency fund, workers in the gig economy can be just as receptive to the importance of having a stash in place.

4. Use visuals
The dialogue around money has to change, Enns says, especially if you want to reach people who feel they lack the acumen needed to develop and stick to a financial plan.

One way of making the conversation more accessible is through the use of info-graphics, which are specifically designed to relate to the unique issues faced by this demographic.

For example, Enns created an in-fographic that illustrates the steps people in the gig economy can take to manage their lump-sum earnings.

Photo copyright: undrey/123RF