If you work sales, freelance or are self-employed, you have a major issue to contend with when it comes to personal budgeting—an unpredictable income. While this can make it hard to plan your monthly spending, it’s not completely impossible. Today, we would like to offer you these tips for budgeting on an irregular income:
1) Calculate the Essentials.
These are the minimum expenses you need to cover every month. Rent or mortgage, utilities, groceries, debt repayment and transportation all fall into this category. This way, you know what you absolutely need to get by.
2) Use the Zero-Sum budget.
Once your main expenses are paid, put away a certain amount for savings, retirement and investments. The rest can then be spent on discretionary expenses.
3) Identify your Discretionary Expenses.
These includes cable, streaming services, entertainment, eating out and hobbies. Add these to your other expenses and you can figure out how much you spend on average each month.
4) Have an emergency fund.
It’s recommended that you have three to six months’ worth of expenses in the emergency fund. That way, if you have a lean month, you won’t have to scramble to pay a bill. This can be tricky to build, depending on how much “extra” you have each month.
A few ways to build this up include setting aside a certain percentage of what you make each month or allocating unexpected income (such as selling something, a gift, a tax refund, etc.) directly into your savings account.
By following these steps, you should find yourself with less of a headache when it comes to living on a balanced budget. If you haven’t already set up a savings, checking or retirement account, come see the experts at AbbyBank today. We can help get you on the right financial path.