5 Budgeting Tips for Variable Income Earners
I think one of the hardest parts about trying to jump into a debt-free journey or a budgeting lifestyle is that all the tools out there are designed to instruct people who have predictable incomes.
But what about those of us with variable or inconsistent incomes? What if you are a travel nurse who wants time off or part time workers?? What if you have a side hustle that is super lucrative one month but mostly dead the next??
Here are 5 tips I have put into practice with my own variable income that I have found success with.
1.Know how much you HAVE to bring home to ensure you are earning enough to live within your means.
With inconsistent or variable incomes, you need to take a step back and look at the bigger picture. If you need to make $45k through the year to live in your home, drive your vehicle, and eat, then you need to ensure you are at the very minimum bringing in that amount of money. Once you know that you make enough throughout the whole year then you can move on to the rest of the steps
2. Underestimate your pay.
Sometimes things completely out of your control happen.
What if the payroll person calls out sick and half your time is not submitted? There are a million things that could pop up, one way to help yourself in the long run is to underestimate your pay.
At the start of that week’s (or months) budget, even if you are predicted to bring in a certain amount, use your lowest months income for your budgeting purposes.
You should make a plan for any money that is made over this number, so that you do not find yourself buying things you never planned too, but by underestimating your pay, it will keep you from potentially spending money that is not there
3. Overestimate your bills
For fluctuating bills, like electric or gas, use the highest bills of the previous year as the amount you budget for.
If you overestimate your bills, then when they come in, if they are less you can use the excess money that was budgeted towards a goal!
4. Have an emergency fund and an emergency emergency fund.
Everyone should have an emergency fund. What that looks like is different for each person/household.
“I like to have a 3–6-month emergency fund (meaning I have enough in liquid savings to cover my living expenses for 3-6 months). ”
Emergency funds are important because they give you some time to find a solution should an emergency arise and your income is no longer coming in.
BUT, when you are on a variable or inconsistent income schedule you should also have an emergency emergency fund. This essentially would be a little cushion that you could pull from during months where your pay is not enough to cover the bills and you can refill it during months where your compensation is higher.
5. All your extra money should have a job!
Whether you have more money because you underestimated your income or your overestimated the bills, you should be giving all your money a job! Whether you are saving for something special, paying debt, investing, whatever the case may be, do not let that money sit around and burn a hole in your pocket! By assigning it a job you can make sure you are being intentional with what you’ve made while you were hard at work!