Irregular income means income that is not predictable over time. Two payments may arrive in one day, and then nothing for the next two weeks.
Our family has lived with variable and irregular income since I stopped work for the birth of second child, four and a half years ago. Since then, and most especially in the last year, I have had to learn how best to manage in this situation. I hope the following tips will be helpful to you if you are in this situation!
- Find or create a budget tool. I created my own Excel spreadsheet, but there are many free ones available online. Microsoft, Dave Ramsey, or Crown are good places to start
- Calculate your average monthly expenses from the past 12 months (or shorter if you don’t have the records). Use this research to refine the expense categories your family will need in your budget
- Calculate your income from the past 12 months. If there is a predictable pattern (eg seasonal work), great!!!! Go ahead and use the monthly average for your budget. If there is no predictable pattern, you have more work to do.
- Consult with your spouse, and strip your expenses down to the absolute bone. Get that figure down as low as you can possibly go. Use the revised figure as the monthly expense figure for your budget. Use the same figure as your budgeted monthly income.
- By now, your budget should balance. If not, repeat the previous step until you are confident that your income matches or exceeds your expenses. If there is just no way it will balance, then you need more income, which is a whole other topic.
- Find a high interest savings account. Every cent you make above your budgeted expenses needs to go into this account. This step is vital, because this is your emergency fund, your savings, and your cushion for low-income months. I use an online account with no card access for this purpose.
I will post more tips on managing your variable and irregular cashflow next week. If you have any tips to add, I’d love to hear from you!
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