One of the greatest challenges of many work-from-home jobs is that income is often irregular or inconsistent, especially if working as a freelancer. This means that some months there may be extra money, some months there is just enough, and others, well, they will fall short of enough to pay bills.
This is referred to, in many circles, as feast or famine, and it can make budgeting a real pain.
These tips should help keep you from sinking on those short months.
Budgeting for an irregular income starts the same way as budgeting for a regular income.
List your regular monthly expenses, starting with those set expenses that cannot be changed.
Then list those that you can adjust if necessary.
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Examples of fixed expenses include rent or mortgage, automobile payments, and utilities.
Next list things you can control such as groceries, and then list consumer debt.
Cut Costs Where You Can
If you can reduce a cable bill by switching to Roku or another streaming device, do it.
If you can reduce your electric bill by remembering to turn off lights and turning the television off when you leave a room, do it.
Can you refinance a car or mortgage and reduce monthly payments? Do that too, if it makes sense.
Now, prioritize those expenses in the order they must be paid so that you know what to pay first with the money you have in months that you fall short.
This may not be exactly what you are thinking.
For example, your family must have a place to live, they must have electricity, and they must have food.
You are going to buy groceries first if you need them, even if some other things have to be late.
Next, you will have to pay for your electricity, water, and shelter so that you can have a place to live.
Entertainment, such as cable, comes last, and so does debt. After debt, list those variable expenses such as maintenance, entertainment, dining out, and other expenses that you can do without if you must.
When there is More
In the months when you have more income than needed, put a portion of it back for those months when there isn’t enough. The goal is to pay all bills every month, but a prioritized budget will allow you to make better choices with what you do have on the months that there just isn’t enough, and hopefully encourage you to save a portion of the extra you have during the “feast” months for those “famine” months.
What Does this Mean?
Frankly, it means sometime you may have to make hard choices. The end goal is to budget in a way that you cover everything as much as possible, put back extra when there is some, and know what to pay first to keep you in the best financially sound situation possible.
By knowing your expenses each month you know what your minimum goal income has to be, and by having them prioritized, you have an action plan to best use what you have in those months that you do not meet your income goal.
It helps to know your grace periods to keep yourself out of credit trouble as much as possible, and do your best to avoid late fees and penalties, of course.
If you are in real trouble every month, there is likely a need to re-evaluate completely. You may need to pick up more work, increase your rates or consider if this is the right path for you all together.
This budgeting method is meant to help those with sufficient, though irregular income, make the best use of the funds they have at the time.
What are your budgeting tips for an irregular income?