Can the On-Demand Economy Work for You?

There has been a lot written about the “on-demand” economy, which meets customer demands for good and services through easy-to-access digital platforms.  The on-demand economy makes it easier for people to enter the workforce or to supplement their income by working part-time.  With the right skills, services, or products, people may be able to choose the number of hours they work, manage their own schedules, and/or work for multiple companies. These jobs reward hard work and hustle—the more you work, the more you have the opportunity to earn.

Individuals earn money in the on demand economy by serving as drivers for ride sharing services, renting out unused rooms in their homes or apartments, completing errands or administrative tasks, or delivering goods like groceries.  Most of these “gigs” allow you to work as much or as little as you’d like, and at times that are convenient for your schedule.

But, the on-demand economy is not without its risks. Most workers in the on-demand economy are considered contractors, rather than employees. They often do not receive health, retirement, or other common employee benefits. Additionally, they may have to master multiple skills to earn enough to pay their bills.  They also have to keep those skills up to date.

If you decide that an on-demand job is right for you, either as your primary or secondary source of income, you will need to make sure that you can manage your cash flow.  First, you need to make sure you have enough income to pay your fixed expenses each month. If your income does not come in on a regular basis, this can be a challenge. A cash flow budget may be helpful in managing your weekly income to cover these expenses.

You may also find that you need to set up a savings account.  A savings account will help you set aside income in months you have a lot to cover months when you don’t.  This is common with contracting jobs.  Without careful planning, you can find yourself with more money they you normally have in one month and not enough to cover the rent the next.

To manage changes in your monthly income, you may also want to consider linking a savings account to your checking account.  You can use the savings account to hold your income or wages. Once a month, transfer the amount you need to cover all of your household expenses from your savings account to your checking account.  Leave any leftover income in your savings account to cover weeks or months when you don’t earn as much. Over time, this money management method should help you maintain your standard of living despite changes in earnings.