One of the best ways to keep a lid on one’s finances is to have a budget and stick to it. It takes a superhuman effort to set up a budget and insist on not spending outside of it. Budgeting becomes much easier, especially when you know what your monthly income is.
But what about individuals who are either self-employed, freelancers, or those whose earnings are commission-based? How do these people budget on what they do not know? How can they budget on an unpredictable income and cannot be planned on as it depends on lots of variables beyond them?
Truth is budgeting can sometimes be assiduous, but budgeting on an income that is not stable will be more technical and more brain-tasking as one would have to be creative in his planning.
In this blog article, we would be filing out free strategies on how to plan one’s budget, especially when you do not have a stable income.
Always estimate that you will be earning very low
When your monthly earnings are irregular and depend on circumstances mostly beyond you, you would do well always to envisage that you will be earning a very meagre amount every month.
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By basing your budget on the probability that you will be earning very low, you will be able to fathom items that should be at the top of your list. This way, you would be budgeting for the necessities, and you would have no room to think of items that would only be consuming your funds.
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Calculate your monthly least expenses
You already have envisaged that your earning will be low; you must also calculate the barest minimum of your monthly incurred expenses.
Your monthly expenses would cover items like groceries, transportation, health emergencies, insurance, and other essential services you must cater to every month.
Calculating your minimum monthly expenses would also help you know how much you must earn to keep body and soul together on month by month basis.
Always have an emergency fund
One piece of advice that is even tenable with those earning a stable income is for everyone to have an emergency fund somewhere ready to be used when the need arises.
This fund could be used to handle health emergencies, house repairs, or any other kind of crisis that might occur during the period.
Without an emergency fund, you will most likely run into debts to keep up with handling these necessary expenses. You should always make room for an emergency fund in whatever you earn during the month as it could be a lifesaver in the long run.
After labouring for a month, it is only right that you pay yourself a monthly stipend for all of your efforts. This fee would help you to be able to save more money than you would be able to ordinarily.
Paying yourself monthly would help you to keep a leash on what your expenses are. In months when you can earn more than you might have envisaged, you quickly would be able to know what to do with such earnings rather than in periods when you never paid yourself, and you allowed undue expenses to eat the bulk of whatever you have earned.
Anybody who earns an unstable income has to do well to avoid debts. Debt is spending your future earnings now. And in your case, you don’t know what that future earning would be.
You might have gone ahead to over-borrow when you could be earning less. It would be best if you remembered that your earnings depend on so many factors, and they are not all in your control.
A client may decide that he does not need your services again, or he could choose to defer his payment or even cut your pay. If you had gone ahead to borrow, thinking that you would be making a refund with what you earn from that client, and any of the above situations happens. You would have ended up creating an avoidable mess for yourself.
So, if your earnings are not stable, try as much as you can to avoid debts.
Budgeting on a fluctuating income can be frustrating sometimes but if you follow the strategies discussed by the book, you should be able to confidently set a budget for your irregular income and live happily and without fear.
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