October 16, 2018
Self-employed workers are mostly financially secure and happy in the present, but concerned about the future, a new report by IPSE (the Association of Independent Professionals and the Self-Employed) and Sherpa has found. The report, ‘The Path to Prosperity, claims that although almost three quarters (72 percent) of freelancers are currently enjoying life because of how they are managing their money, 77 per cent are concerned the money they have – or are going to save – will not last. It also found that over half (51 percent) of the self-employed have felt anxious or stressed about their financial situation. This is exacerbated by the lack of tailored money management advice and flexible savings products available for the self-employed.
According to the research, short-termism is particularly predominant among Millennials, who are more likely to focus on the financial near future. Generation X and Baby Boomers, on the other hand, are far more likely to prioritise saving for retirement.
To help improve the situation, the report identified the factors that most define financial wellbeing for the self-employed. They included: the freedom to make choices and enjoy life, earning enough to provide for family and loved ones, and being able to put money away for retirement.
To alleviate any longer-term concerns and provide the self-employed with the means to take control of their financial wellbeing, the report makes the following recommendations:
- Put protections in place – Irregularity of earnings is the main barrier preventing self-employed people from taking control of their financial situation. Building stronger business networks and a more regular stream of clients, budgeting and putting insurances in place can all help alleviate financial concern.
- Build up confidence to improve earning potential – Upskilling and training allows people to expand their skills and confidence, thus giving them a pathway to develop their careers and maximise earning potential. Millennials in particular would benefit from training providers who offer advice about money management, dealing with irregular work patterns and aligning their skills with the demands of running a business.
- Increasing understanding and flexibility – Volatile government taxation and regulation, a lack of self-employed-specific advice and financial products that do not offer flexibility are barriers to effectively managing finances. Financial policies and services should be made available which understand the challenges of self-employment and offer adaptable solutions.
Suneeta Johal, IPSE Head of Research, Education and Training, commented: “What you have at the moment is a situation where the self-employed are almost the YOLO workers of the modern economy: secure and happy for today, but worried about tomorrow. So, while this report confirms that being your own boss can be extremely rewarding, it also raises concerns. Because of irregular work patterns, late payments and a lack of tailored products, self-employment can pose financial challenges and leave people concerned for the future. The crucial recommendations in this report can alleviate that and help the self-employed take control of their financial wellbeing.”