How to Reduce Financial Stress as a Temporary Worker

Financial stress and not having enough money to pay the bills is a huge pressure for many Americans. As a temporary or on-demand worker, you need to take even better care of your money, since income can be unpredictable.

We’re here to help. Follow our plan below and you can get on top of your expenses, build up some savings, pay down your debt, and even invest in your future. Your peace-of-mind will improve, and you can enjoy the freedom of on-demand work without worrying about every cent.

Step One — Understand What All Your Expenses Are as an On-demand Worker

Start by working out exactly how much you spend each month. Get hold of your bank, credit card, loan, and other financial statements. Then, go through each of them line-by-line, to calculate how much you spend out on a monthly basis.

You will want to total how much you spend in the following areas:

• Essential spending.
• Optional spending.
• Luxury spending.
• Business spending.

These are not perfect categories, and everyone’s circumstances differ, but they will give you a good starting point.

Essential Spending for On-Demand Workers

Essential spending is all the money you pay out that is not optional — you must pay it so you can meet your basic needs. Your essential spending will likely include:

• House living like mortgage or rent payments, property tax, maintenance, repairs, etc.
• House shopping costs like appliances, furniture and furnishings, cleaning products, etc.
• Grocery shopping for food.
• Utility bills like gas, electricity, water, phone, broadband, etc.
• Vehicle expenses including gas, breakdown cover, registration, maintenance, and repairs.
• Insurance for your home or car.
• Healthcare premium costs and medical expenses, including prescriptions, dental, and eye care.
• Childcare costs like school fees and other expenses.
• Pet expenses like food and vet visits.
• Loan repayments for credit cards, vehicles, debt consolidation, or other purchases.
• Fares for public transport.
• Mobile and landline phone costs.

Optional Spending for On-Demand Workers

This is the spending you do that helps you live a reasonable quality of life. It likely includes:

• Shopping for clothes, shoes, and similar products.
• Gifts for birthdays, anniversaries, and other special occasions.
• Streaming services, TV costs, internet, and other subscriptions.
• Technology expenses like computers and smartphones.

Luxury Spending for On-demand Workers

This is the spending that helps you to enjoy life to the fullest, it includes:

• Eating out, takeaways, lunches, fast food, alcohol, etc.
• Vacations and days out.
• Gym membership, beauty treatments, sporting events.
• Entertainment including movies, music, books, and games.
• Savings and contributions to investment and retirement accounts.
• Hobbies and pastimes.
• Charitable donations.

on-demand Business Expenses

Finally, you have the business expenses you need to pay out. These will vary depending on the type of business you run, but typically include:

• Accountancy and other professional services.
• Business formation and filing fees.
• Software, hosting, and subscription fees for work.
• Bank and finance charges.

Go back for a few months and work out how much your average Essential, Optional, Luxury, and Business expenses are per month. Then, add 10% on to each one, this is to take account of areas you may have overlooked or emergency expenses.

Examples of Calculating Expenses

Ben goes through all of his financial statements and works out he’s spending the following:

• Essential: $1,200 a month, plus 10% = $1,320.
• Optional: $150 a month, plus 10% = $165.
• Luxury: $300 a month, plus 10% = $330.
• Business: $100 a month, plus 10% = $110.
• Total: $1,750 a month, plus 10% = $1,925.

Step Two — Work Out Your Average Income

Now, calculate how much you make in an average month. Include any income you receive — from employers, on-demand or temporary work and gig work, side hustles, or other income.

Then, take account of tax you’ll need to pay. For anything other than pay from an employer, you’ll want to estimate paying between 25% and 30% of your earnings as tax.

Examples of Working Out Average Income

Ben’s income works out as follows:

• Part time, employed work: $800 a month.
• On-demand work: $1,300 a month.
• Other income: $200 a month.
• Tax on on-demand and other income: – $400 a month.
• Total income: $1,900 a month.

Step Three – Work Out How Much You Will Have Left Over, and Make Adjustments

Next, deduct your expenses from your after tax income, to work out how much you will have left over each month. If you’ve got very little left over, consider reducing some of your optional or luxury expenses.

When it comes to reducing your optional and luxury expenses, you might need to make some tough choices. See what you can go without for a few months, as you’ll be using any money you save to improve your finances over the medium- to long-term.

Examples of Reducing Costs

Ben looks at his finances and realizes that his income almost exactly matches his expenses. He decides to reduce his luxury and optional spending. This gives him around $300 extra a month to make changes for his financial future.

Step Four — Use Your Extra Money to Pay Down Debt and Build an Emergency Budget

Once you’ve got some extra money, there are two things you can do to reduce financial stress — pay down your debt and create an emergency budget.

Review All Your Debts and Find Those That Charge the Most Interest

Put some of your extra money towards paying off those debts. This will help reduce the interest you pay, lower your monthly repayments, and help you get into the habit of securing your financial future.

Create an Emergency Budget

Once you have your debt and finances under control, it’s time to take the most important step towards peace-of-mind — building an emergency budget. An emergency budget is essential because it helps you stop living from hand-to-mouth. You will build up a financial buffer, so if your income drops or you have unexpected expenses, you don’t need to go into debt just to scrape by.

Ideally, you will want your emergency budget to cover about three months of your “essential” and “business” costs. That will give you enough time to get back on your feet. Simply take some of your money each month and put it into a savings account, or somewhere else you won’t be tempted to spend it.

Examples of Emergency Budgets

Ben calculates that he would need to save around $4,000 for his emergency budget. He puts all of his $300 extra into his emergency budget, and creates one in just over a year.

Step Five — Plan for Your Longer-Term Future

Once you have an emergency budget in place, and you’ve paid down your debts, you should have much more peace-of-mind. Now’s the time to start looking to your longer-term future. Explore retirement planning and other medium-term savings and investments. Get into the habit of growing your wealth on an ongoing basis. This can really aid you in building up your financial security.

And there you have it, our guide to getting on top of your finances and reducing your financial stress. Review your calculations a couple of times a year and adjust as needed. That way you’ll always have a picture of where you are, and you can tweak your spending and saving appropriately.

With the right approach, on-demand and temporary workers can create a good financial present and future, and you can make your money start working for you.