Freelancing is an increasingly popular way to earn a living among millennials.
It’s a deviation from the standard 9 to 5 office schedule. Freelancers can use their talents in coding, graphic design, or writing to bring in extra cash on a job-by-job basis.
However, as glamorous as freelancing can sound, the financial side of it can be intimidating. When you’re considering what investments to make as a freelancer, it’s best to stay on the safe side with options like GICs.
Here, we’ll offer some responsible investing choices that millennials can make as self-employed agents.
The Rise of Freelancer Gigs
Hubstaff Talent states that there are around 2.7 million freelancers in Canada. This number makes up 15% of the Canadian workforce and represents a drastic spike from the last decade.
Some freelancers focus solely on securing gigs, while others pick up work alongside a part- or full-time job.
In any case, freelancers can choose which jobs they take on without being tied down by contracts. They are free to work from wherever they want to as long as they, in most cases, have a reliable internet connection.
Freelancers don’t receive a set income, so cash flow may often be the primary concern for many of them. Millennials also have a lot more debt than previous generations.
Even with income that isn’t guaranteed, you still need to make responsible financial decisions and set money aside for your future.
This situation is where investment becomes an attractive way to improve cash flow.
How to Invest Wisely
Even as a freelancer, you have options for investments that will generate the best returns. Here’s how to invest wisely:
1. Lower Your Yearly Taxes with an RRSP
If you’re looking to lower your taxes at the end of the year, consider making contributions to a Registered Retirement Savings Plan (RRSP).
Any contributions you make to your RRSP will be a deduction from your income, which means a delay in the taxes on your RRSP investments.
You’ll earn tax-free investment income on all of your contributions. Because you’ll likely be in a lower tax bracket when you retire, this type of tax deferral will offer you significant savings.
2. Play It Safe with a Guaranteed Investment Certificate
A Guaranteed Investment Certificate, or a GIC, is a safe way to invest your money as a freelancer. It’s low risk, as you have a guarantee to receive your initial investment amount back after your GIC matures.
Here are a few things to keep in mind when deciding if a GIC is right for you:
- Minimum amount: To get started with a GIC, you’ll need a minimum of $500.
- Initial fees: GICs are cost-effective, as you won’t face any charges when you purchase one.
- Maturity date: A majority of GICs pay a fixed interest rate over a set period, such as six months, one year, two years, or five years. Your interest rate will be higher if you select a more extended period.
- Penalties: If you withdraw your money from a GIC before the maturity date, you may pay the penalty.
3. Diversify Your Investments with Mutual Funds
Mutual funds let you diversify your investments without putting your hard-earned money at risk.
When you purchase one, you are investing in a large group of assets like stocks and bonds. Mutual funds are under professional management, so you can rest assured that an expert is working hard to earn you a profit.
These funds often require a minimum of $500, but some brokers will waive their minimum amounts if you agree to make monthly contributions. This option is a great way to add some consistency to your financial goals!
If your income fluctuates as a millennial freelancer, consider these safe investing options. They are ways to get started and won’t leave you exposed to the volatile side of investing.