Takeaways
- Gig workers perform short-term jobs and are often independent contractors.
- High-income earners can make over $100,000 with flexible work arrangements.
- Gig workers sometimes establish businesses to help run their side hustle.
- Gig workers must manage their costs and set aside taxes on their earnings.
- Rideshare services, food delivery, freelance writing, and online tutoring services are all considered part of the gig economy.
The modern workforce is undergoing rapid changes, and one of the most significant shifts in recent years has been the rise of the gig economy. The gig economy, a typical labor market for short-term, flexible jobs, empowers workers to be independent contractors or freelancers rather than traditional full-time employees. From driving for rideshare services to freelance writing, gig work offers people more control over when, where, and how they work, fostering a sense of independence, empowerment, and entrepreneurial spirit.
Stash Extra Earnings in a CD:
How the Gig Economy Works
In the gig economy, workers take on individual jobs or “gigs” instead of long-term employment with a single employer. These gigs can range from delivering food or groceries to offering graphic design services or online tutoring.
Gig workers are typically classified as independent contractors, which means they are responsible for managing their own taxes, benefits, and work schedules. According to a study by Upwork, in 2023, 38% of the American workforce participated in gig work.[1] This freedom can be appealing, but it also comes with more personal responsibility and financial planning.
7 Steps to Get Started
If you are thinking about joining the gig economy, here are seven steps to help start successfully:
1. Explore Your Options
Many types of online jobs are available, so start by identifying your skills and interests. Some popular gig economy jobs include:
- Rideshare driving (Uber, Lyft)
- Food delivery (DoorDash, Grubhub)
- Freelance writing, design, or coding (Upwork, Fiverr)
- Tutoring or teaching (VIPKid, Wyzant)
- Task-based services (TaskRabbit, Handy)
Take the Next Step:
on Upwork’s Website
Upwork
Smart Money Rating: 5/5
Best For: Finding Remote and Freelance Work
Success: Freelancers earned $2.3B on Upwork in 2020
2. Research Pay
Not all gigs pay the same. Some jobs pay by the hour, others by task or project, but it is possible to be a high-income earner using gig work. In 2024, 4.7 million independent workers made more than $100,000 annually.[2]
Research how much you can realistically earn and compare that to your financial needs. Look into what other gig workers say about pay rates and whether it is worth your time. This potential for economic success can be a motivating factor for those considering gig work.
Read More: 5 Great Business Ideas
3. Consider Costs
Gig work often comes with out-of-pocket expenses. Consider all of the items you need to run your business smoothly. They should also include start-ups.
For example, if you decide to drive for Lyft or Uber, you must pay for gas, car maintenance, and insurance. Freelancers may need to invest in equipment, software, or marketing. Make sure you understand the full cost of doing the job so you can plan accordingly.
Read Also: 10 Popular Freelance Jobs
4. Decide to Set up a Company
Depending on how serious you are about gig work, consider setting up a formal business. There are several ways to structure your business:
- Sole Proprietorship: Simple to set up and most common for gig workers. You and your business are the same entity.
- Limited Liability Company (LLC): Offers more legal protection and can separate your personal and business finances.
- S Corporation: Some gig workers may choose this for specific tax advantages.
- C Corporations: This is the most complex formulation and could be useful for converting high-income gig work into a thriving business model.
Consult a financial advisor or accountant if you are unsure which structure is best for you.
>> Need advice? Here’s How to Choose the Best Financial Advisor
5. Don’t Forget About Taxes
As an independent contractor, taxes are not withheld from your pay. You are responsible for paying self-employment taxes. Keep track of your income and expenses, and consider making quarterly tax payments to avoid fees and penalties.
Read More: 7 Steps to File Your Taxes Quickly
6. Avoid Scams
Unfortunately, the gig economy is not immune to scams. Be cautious of jobs that promise high pay with little effort or require upfront fees. Always research companies before signing up. Use trusted platforms and never share personal or financial information with unverified sources.
Read Also: 9 Ways to Protect Yourself from Credit Card Hacks
7. Consider Pivoting to Full Time
Some gig workers start part-time but succeed enough to make it their full-time career. If you enjoy the flexibility and income potential, you can expand your services, take on more clients, or diversify your gigs.
>> You Might Also Like the Pros and Cons of Working from Home
What to Do with Gig Money
Managing your gig income wisely can help you reach your financial goals faster. Here are a few smart moves:
- Save for Taxes: Set aside 25% to 30% of your earnings for tax payment. Whether you earn more as a sole proprietor or set up an LLC for your work will depend on how much you owe in taxes. Read more about the current Tax Rates and Brackets.
- Build an Emergency Fund: Gig work can be unpredictable, so having savings helps during slow periods. Read more about how to start setting up an emergency fund.
- Invest for the Future: Consider opening a Traditional or Roth IRA or investing in other retirement accounts, as gig workers do not receive employer-sponsored benefits.
- Track Expenses: Keep detailed records of business-related expenses for tax deductions.
Smart Summary
The gig economy offers incredible flexibility and freedom for those looking to earn money outside of traditional employment. Whether part-time or full-time, gig work can be a valuable tool for achieving financial independence. Make sure to manage your income wisely and plan for the future.
Smart Money requires our expert writers to rely on trusted primary sources—academic research, government reports, expert interviews, original reporting, and peer-reviewed data—to deliver precise and up-to-date content. All of our content is thoroughly fact-checked. We also incorporate relevant research from reputable publishers when it aligns with our editorial focus. For a closer look at our rigorous journalistic standards, explore our editorial guidelines.
(1) Upwork. Freelance Forward 2023. Last Accessed April 29, 2025.
(2) MBO Partners. State of Independence in America 2024. Last Accessed April 29, 2025.
