While taking the risk to take up independent ventures like freelancing or opening our own business, we know that irregular income will be a prominent burden on our financial status.
Every month can be a different story. Some months our income can be enough to provide for us for ages, yet some months it isn’t even enough to fulfill our basic wants and needs.
Irregular income can be intimidating to survive with, but it is possible. By applying just a few measures to your daily life, you can manage your expenses with your fluctuating income in no time!
Here’s how you start:
Understand your income
We need to learn the patterns of our irregular income in order to budget around it. Take a few months to study how your earnings fluctuate with time, and use that information to trace out a budget plan that works best for you.
Then, identify your lowest income and use this baseline as the foundation of your monthly economic plan. This way, you have a guide to help you through the most difficult months, so in the months in which there is more earning, you can allocate that money to savings/ debt payments, etc.
Create a Buffer Fund
During every month that you earn more than usual, save a portion(at least 30%) for the rough times. An unexpected expense may come up, like a wedding or a birthday, so this fund will be your cheat sheet in keeping your finances at peace.
Moreover, this fund will allow you to ease up on your spending in the low-income months, which will allow you to slowly improve your lifestyle at a steady pace.
If setting the “extra” money aside is bothersome for you, you can automate your savings. This will use the power of advanced technology to save your money from being unreasonably spent by you!
Track your spending
Learn to monitor your expenses, no matter how big or small. You may think that the little snack you buy here and there would not make a difference in your budget, but trust me, it does.
Keeping in check will help us identify the areas where we may need to cut back a bit or adjust our impulsive habits when it comes to money.
You can also use budgeting apps or tools like YNAB(You Need a Budget) or Empower to use as a blueprint in order to learn about your expenses. Learn about these apps in detail and more here.
Manage your expenses
At the start of every month, categorize your needs into essential or non-essential/ flexible expenses. Be it with just a pen and paper, note down all your necessities and wants so that you can sort out your income based on them.
There are also many rules that we can use to learn which expense to allocate which amount of money to, like the 70-20-10 rule, where 70% goes to wants, 20% goes to needs, and 10% goes to savings and debt payment.
We can also try to keep a lookout for cost-saving opportunities like deals and sales, while of course, keeping in mind to not stock up on unnecessary supplies while chasing the said deals(Impulses shouldn’t always be acted upon!).
Seek professional help
It’s not always practical to try to figure ALL things out on your own. Asking for help by consulting financial advisors can allow us to get a professional’s point of view regarding our matters, leading to better mental clarity needed to make better economic decisions.
We can also learn to utilize our online resources, i.e., blogs and sites. They can provide us with factual information to read through by using articles(like this one!) and allow us to educate ourselves more in our budgeting journey.
Just go at your own pace and try to use the internet to your advantage in order to feel more in control of your spending.
CONCLUSION
To sum it all up, budgeting when you have an irregular income can be hectic as every month is unpredictable, but we need to keep our cool, monitor our spending, and most importantly, learn to adapt and adjust according to our own personal circumstances.
Reviewing your budget regularly will set you up for success as is, but if you top it off with being patient and flexible, you’ll be able to improve your spending habits before you know it!
Proper budgeting is not a cage you have to confine yourself to. Just learn to let yourself experiment with different tools and techniques to learn what works best for you, and with time, you’ll feel financially stable regardless of what amount of income that flows into your account that month.
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