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Irregular Income Budgeting Review.

Budgeting refers to creating a spending plan depending on one’s monthly income and their expenses and goals. For business owners, self-employed, freelancers and sales people their income may not be consistent as people who are employed thus it would be important to have a budget.

Budgeting

How do you ride the wave of an irregular income?

Know your bare minimum expenses.

This involves listing down all your fixed expenses, they include; rent, food, electricity, mortgage, insurance.

After listing down, demystify wants and needs, this involves segmenting your expenses to essentials and non-essentials.

Essentials are the things we can’t live without and non-essentials are luxuries; things that if we don’t do our feelings will be hurt but nothing major will happen.

Essentials include; food, utilities, shelter, transport, service debts and savings.

Non essentials include; hobbies, entertainment, subscriptions, eating out etc.

It’s also important to note that luxury is relative.

Live on the previous month’s budget.

This involves budgeting on what you made on the last month and not on income projections or wishful thinking, budgeting on what you made brings a normalcy to your spending thus you don’t have to live on credit to fit a certain lifestyle.

Have an emergency fund.

With an irregular income, setting up a budget for an emergency fund helps you navigate tough times and have a sense of continuity.

Predetermine a certain percentage of your income on a weekly or monthly basis that will go to the emergency fund depending your cash flow.

Pay yourself a salary.

Determining and paying yourself a salary helps curb unplanned spending and helps you have consistency. You can manage this by having separate accounts for personal and business.

Have a set date to pay all your bills.

By paying all your bills on a set date you get disciplined, this includes savings and servicing your debts too.

Do monthly reviews.

Reviewing your monthly expenditure over time as an irregular income earner helps you know your spending patterns and helps you adjust and embrace flexibility; this can be done with the help of a financial diary.

Monthly Review

In the words of Martin Luther King Jr; you do not have to see the whole staircase, just take the first step. Start your budgeting journey so you can be in control of your finances.

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