I used to have a regular income as a student assistant in our school’s library. After that, I worked behind the cash register at a local diner. It was good knowing I would get a paycheck every two weeks, but the job schedules just weren’t gelling with my school schedules. The work itself wasn’t too hard, but trying to juggle physically being at work with my academic responsibilities was almost impossible.
And that’s why I decided to give all that up and use online earnings methods as my main sources of income back in college. It was great, since it didn’t clash with my academics – my laptop was my office. But what wasn’t so great was the fact that I didn’t always make the same amount of money every month. And that proved to be tough.
It took some trial and error, but I think I got things figured out soon enough. So today, I’ll be sharing my tips on how to budget with variable income. Even if you’re not a working student, these tips should work for you. After all, you could say I’m a freelancer right now.
How to Budget with a Variable Income
If you don’t have a steady 9 to 5-based income, I can relate to how tough it is to work with a variable income budget. One moment, you’re flush with cash, the next you’re scrambling for clients and projects. I feel for you, because I’m down there in the freelancing trenches as well. Luckily, there are ways for us to survive – or even thrive – on a variable income. Here are my top tips for doing just that!
Always Pay Yourself a Regular Salary
I know this sounds strange when you don’t have a regular income, but hear me out. Your income may be variable, but some of your monthly expenses will not… or should not. Buying fewer groceries this month because you earned less than usual can be really demoralizing. You can cut down on luxuries, sure. But necessities should be untouchable.
So what do you do? Give yourself a monthly salary based on how much you usually spend per month. This salary needs to be based mostly on necessities. Your salary will also function as a target for your monthly income. Even with variable income, it’s good to have a target to try and hit each month. Having a “whatever” budget is not the way to go. Have a goal, and try to stick to that. The goal doesn’t have to be super-big. Just enough to cover your expenses is enough.
And what happens when you exceed your monthly target? Save it! Since your regular expenses are already covered, you can afford to set any extra money aside. And speaking of savings…
Have Enough Savings
Like I mentioned above, you should set aside all the extra money you earn. There will be times when we don’t hit our monthly target, and don’t get to pay ourselves. That’s okay – that’s the nature of the game. There’s no point beating yourself on the head for it. But you need to prepare for those moments when money is flush. The money you set aside when times are good will function as your buffer when times are bad.
Avoid Temptation – But Know When to Treat Yourself
When the getting is good, it’s easy to fall into the assumption that you’ll always be making good money. I think most of us are financial optimists – and it’s not hard to see why. When your income is not regular, you gotta convince yourself that things are going to be okay next month, and the month after. When faced with uncertainty, we build this wall of optimism. And that’s good – even necessary – to have. But you need to avoid the temptation to spend all that extra money. Save, and save a lot!
That said, it really, really sucks to save money without treating yourself every so often. What I do is set certain milestones, and celebrate achieving those milestones by treating myself. For example, the day I hit a thousand dollars in my savings account. I replaced my old, worn-out pair of running shoes (I love to jog). Knowing when to treat oneself is helpful, because it gives you a reward system. You’re not just saving money for some undefined purpose.
The key here is to keep your splurges modest. Don’t go all out and blow all your hard-earned savings in one go!
Have Contingencies
I know I already mentioned savings (many times). But when I refer to contingencies, I don’t just mean savings. I’m referring to times when things get really bad. What do you do when you don’t have any income and your savings are tapped-out? With any luck, none of us will have to face this situation. But in case you do (I did once), it’s best to have a contingency plan. It’s a bit hard to tell you exactly what your contingency plan should be, since that’s a pretty personal decision. But for me, that contingency was to sell some of my valuables. A contingency is can also be a logistical decision. When I hit rock-bottom, I decided to work extra hard, which came at the expense of sleep. But I had to do what had to be done.
Always Use Cash
A credit card isn’t a magical genie that gives us whatever material things we wish for. It may feel good buying stuff with credit cards because it doesn’t feel like spending real money, but whatever positive feeling you get is only fleeting. The best way to avoid overspending with a credit card is to avoid using one altogether. And that’s why I always use cash. Cash is “real money”; when you spend cash you can literally see your money leaving your wallet. And that keeps you honest. So always carry and use cash!
This has been one of the best ways to keep me within a fluctuating monthly income. It’s easier to track my spending habits with cash.
And that’s why I decided to give all that up and use online earnings methods as my main sources of income back in college. It was great, since it didn’t clash with my academics – my laptop was my office. But what wasn’t so great was the fact that I didn’t always make the same amount of money every month. And that proved to be tough.
It took some trial and error, but I think I got things figured out soon enough. So today, I’ll be sharing my tips on how to budget with variable income. Even if you’re not a working student, these tips should work for you. After all, you could say I’m a freelancer right now.
How to Budget with a Variable Income
If you don’t have a steady 9 to 5-based income, I can relate to how tough it is to work with a variable income budget. One moment, you’re flush with cash, the next you’re scrambling for clients and projects. I feel for you, because I’m down there in the freelancing trenches as well. Luckily, there are ways for us to survive – or even thrive – on a variable income. Here are my top tips for doing just that!
Always Pay Yourself a Regular Salary
I know this sounds strange when you don’t have a regular income, but hear me out. Your income may be variable, but some of your monthly expenses will not… or should not. Buying fewer groceries this month because you earned less than usual can be really demoralizing. You can cut down on luxuries, sure. But necessities should be untouchable.
So what do you do? Give yourself a monthly salary based on how much you usually spend per month. This salary needs to be based mostly on necessities. Your salary will also function as a target for your monthly income. Even with variable income, it’s good to have a target to try and hit each month. Having a “whatever” budget is not the way to go. Have a goal, and try to stick to that. The goal doesn’t have to be super-big. Just enough to cover your expenses is enough.
And what happens when you exceed your monthly target? Save it! Since your regular expenses are already covered, you can afford to set any extra money aside. And speaking of savings…
Have Enough Savings
Like I mentioned above, you should set aside all the extra money you earn. There will be times when we don’t hit our monthly target, and don’t get to pay ourselves. That’s okay – that’s the nature of the game. There’s no point beating yourself on the head for it. But you need to prepare for those moments when money is flush. The money you set aside when times are good will function as your buffer when times are bad.
Avoid Temptation – But Know When to Treat Yourself
When the getting is good, it’s easy to fall into the assumption that you’ll always be making good money. I think most of us are financial optimists – and it’s not hard to see why. When your income is not regular, you gotta convince yourself that things are going to be okay next month, and the month after. When faced with uncertainty, we build this wall of optimism. And that’s good – even necessary – to have. But you need to avoid the temptation to spend all that extra money. Save, and save a lot!
That said, it really, really sucks to save money without treating yourself every so often. What I do is set certain milestones, and celebrate achieving those milestones by treating myself. For example, the day I hit a thousand dollars in my savings account. I replaced my old, worn-out pair of running shoes (I love to jog). Knowing when to treat oneself is helpful, because it gives you a reward system. You’re not just saving money for some undefined purpose.
The key here is to keep your splurges modest. Don’t go all out and blow all your hard-earned savings in one go!
Have Contingencies
I know I already mentioned savings (many times). But when I refer to contingencies, I don’t just mean savings. I’m referring to times when things get really bad. What do you do when you don’t have any income and your savings are tapped-out? With any luck, none of us will have to face this situation. But in case you do (I did once), it’s best to have a contingency plan. It’s a bit hard to tell you exactly what your contingency plan should be, since that’s a pretty personal decision. But for me, that contingency was to sell some of my valuables. A contingency is can also be a logistical decision. When I hit rock-bottom, I decided to work extra hard, which came at the expense of sleep. But I had to do what had to be done.
Always Use Cash
A credit card isn’t a magical genie that gives us whatever material things we wish for. It may feel good buying stuff with credit cards because it doesn’t feel like spending real money, but whatever positive feeling you get is only fleeting. The best way to avoid overspending with a credit card is to avoid using one altogether. And that’s why I always use cash. Cash is “real money”; when you spend cash you can literally see your money leaving your wallet. And that keeps you honest. So always carry and use cash!
This has been one of the best ways to keep me within a fluctuating monthly income. It’s easier to track my spending habits with cash.
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