The number of freelancers has been increasing gradually over the last decade. Although they quite enjoyed the flexible schedule and good work-life balance, were they financially better off being their own boss? Probably not. A research conducted by Wharton Fintech suggests that freelancers give up about $24000 per year on average which is the amount they can earn as conventional employees. The fact is that more than 50% of freelancers earn less than this amount, leaving them at a substantial disadvantage compared to the traditional employees. Additionally, besides setting prices, tracking expenses and developing networks, freelancers have to deal with bookkeeping, issuing invoices and understanding when to pay taxes. Fintech helps freelancers to simplify their work mainly through project management, time management, business banking and personal accounting. It also enables freelancers to spend, save and invest money smartly.
1. Smart Spending Freelancers always struggle to manage their spending. It is so hard to set a budget and stick to it due to the unstable and fluctuating cash flow month to month. Moven, a digital banking service, helps to track and analyze your business and personal spend separately. Other mobile apps also help freelancers to cut spending on essentials. Take for instance Checkout 51, a grocery app that offers you discounts on specific products. Once your receipt is confirmed by the app, you will receive a cash-back credit.
2. Smart Saving Smart savings apps help freelancers to save money automatically and efficiently. Take Acorns for example, after your credit cards are linked to the app, Acorns will make each transaction a round figure dollar and automatically invest your extra change into a diversified portfolio of ETFs. If we assume there are two transaction for the average freelancers every day, Acorns charge extra €0.50 each transaction in average – so the user can save about €350 per year net of fees. Additionally, the investment conducted by Acorns can generate sensible returns.
3. Smart Investing Freelancers are keen to invest a proportion of their idle money to maximize their wealth. Majority of them choose traditional brokerage accounts or traditional managed investment accounts, both of which are far more expensive than using brokerage and managed investing apps. Especially, as the passive investment has become so popular today, cutting the fees should be the top priority for investors. For example, Betterment, an automated investment manager, only invests in ETFs. According to Morningstar, investors only pay less than 0.44% in EFTs fees and around 0.25% management fees. While Traditional advisors generally charge 1% management fees and the average traditional index fund costs 0.74%.
In a word, Fintech can underpin the success of freelancers.
