When you have a fluctuating income and are unsure what you’ll bring home from month to month, budgeting can be challenging; However, budgeting also becomes much more important in this circumstance, as well.
Trying to plan for certain spending necessities or financial goals can be difficult when you’re not sure how much you’ll be paid or when you’ll be paid. It is possible to work around this scenario, however, by utilizing certain tips and tricks. Below, we’ll discuss tips for surviving on unstable income.
Calculate Your Monthly Expenses
Your first step should be knowing exactly what your necessities total to each month. Carefully calculate how much you’re spending on your rent/mortgage, credit cards and loans, transportation, utility bills, childcare, and groceries. The total that you reach in this category will give you exactly how much you need to get by each month. For any bills that fluctuate, estimate them based on the past three month’s average.
Calculate Your Discretionary Living Expenses
Discretionary spending includes things your phone and cable bills, entertainment spending, clothing, and hobbies. These are things that you can live without, but that you regularly spend on each month. It’s an important idea to gather these numbers because you’re spending money on them, as well, and they are a part of your budget.
Just as if you’re running a business, put yourself on a set salary each month. This can help you adjust to living within a certain amount each month. If you make more than your salary, great! You can add that additional income into savings. If you make less, you’ll either need to readjust your spending or pull cash out of the additional money you set aside.
Make Decisions Based on the Last Month
Instead of making decisions based on what you expect for the following month, live off the previous month’s income history. This will allow you to set yourself onto a more realistic budget, instead of what you’re hoping your next month’s budget will be.
Save for Emergencies
Your emergency fund can be your best friend, especially when your income is irregular. Financial experts recommend that you save to accommodate 3 months worth of living expenses. This can be extraordinarily important when your income fluctuates regularly. If you don’t have an emergency fund yet, prioritize this savings category over all others until you have it built up enough to accommodate you for at least 3 months.
With any type of income, reducing your discretionary spending is important; However, this is even more important when you have an unstable income. Learning to live on less, as a rule, can help keep you on track when your income is less. This doesn’t mean you shouldn’t splurge every now and then, but unnecessary spending should be the exception, not the rule.
Consider what you can reduce in your monthly bills, also. Is there an opportunity to lower your phone bill? What about reducing your utility spending? Meal planning can lower your grocery bill tremendously. Every little bit counts and offers an opportunity to either save extra cash towards your important financial goals or set aside extra money for the months in between when you don’t quite hit your numbers.
With this type of income and budget, it’s important that you keep a watchful eye on everything and make changes accordingly. You may experience changes in your bills, a reduction or increase in your take-home pay, or an unexpected expense. With each fluctuation impacting your finances, it’s essential that you remain flexible and go with the flow.