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Working Without a Net: Protecting Yourself in the Freelance Economy

By Md Miraz Kabir • Published November 2, 2017 • 3 Min Read

Today, it seems that freelancing, contract work and "the gig economy" has become a career path that has expanded beyond the traditional realm of temporary employment.

In Canada, approximately 1.9 million people are classified as self-employed and another 2.3 million people are classified as temporary employees.

Freelancing can be an attractive option because of the flexibility and independence it may offer; however, for some the potential uncertainties of steady work and need for benefits could outweigh the mobility freelancing provides.

Whether you’re a recent graduate or a seasoned professional, there are some things to consider before plunging headfirst into freelancing.

Consider a Rainy Day Fund

No matter your age, having a rainy day fund of at least three months’ worth of income can help cover basic living expenses or unexpected medical costs.

Traditional employment — a steady, salaried position at a firm — usually provides a safety net in the form of group insurance plans, severance pay and other employee benefits. Choosing to work as a freelancer can mean not having access to company programs, so it’s important to plan ahead to protect yourself and your assets.

Putting money aside for unexpected expenses like dental appointments, medical examinations or prescription drugs, may help to provide peace of mind in-between gigs.

Protecting Yourself

In addition to a rainy day fund, health and creditor insurance plans may help you weather temporary disruptions to your work. For example:

  • Disability insurance can replace your income if accident, injury or illness (including mental illness) keeps you off work. It can also provide benefit and premium options to match your occupation and income level, and supplement the gaps left by CPP and QPP benefits.
  • Critical illness insurance can provide much needed funds if you are diagnosed with a condition like cancer, heart attack or other critical illnesses. Buying a policy when you’re younger, and potentially healthier, makes it more affordable.
  • Creditor insurance can provide financial protection for your credit card, loan, or mortgage should the unexpected happen.

Finding Work as a Freelancer

Recent studies have shown that the most successful freelancers are those who leverage traditional work and use past experience to establish credibility. But many young people entering the workforce have limited work experience, making freelancing potentially their only source of income.

[quote-callout content=”Gone are the days where the work structure looks like a hierarchy; I think it’s more of a puzzle or a network where you need to bring in the right expertise at the right time.” display=”all” position=”right”]

Michael Carter, CEO and co-founder of Kahuso a platform for senior executives looking for freelance positions, predicts the rise of freelancers will occur at every level of organizations. “I think companies fundamentally have to learn how to access great talent and not to own it. Gone are the days where the work structure looks like a hierarchy; I think it’s more of a puzzle or a network where you need to bring in the right expertise at the right time.”

The pace at which business is evolving suggests freelancing and contract work may continue to play a significant role in the future economy. To stay afloat, smart freelancers can take measures, including rainy day funds and adequate insurance, to help mitigate the ups and downs in the ever-changing world of work.

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This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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