Guest Blog Article: How to Manage an Unpredictable Income
By Johanna Cider
With flexible working schedules being well sought, many people have turned to freelancing as a career option. Freelancing is a great way to make a living. It gives you complete freedom of how many hours you’d like to work, how much you want to charge clients and what hours you work. However, you’ve got to admit that being on an unpredictable income can be difficult. Regardless of your workload, you’ll have to adopt a conservative approach. Here are a few tips to manage an unpredictable income and ensure you won’t be going into debt!
Make a Budget
Budgeting is often associated with regular income, but it’s also extremely useful for those whose income is unpredictable. Your budget allows you to dictate where your money goes rather than disappearing on things that aren’t a priority. Figure out your monthly expenses before you make a budget.
Start with fixed expenses like rent, insurance and utilities – these are necessities and must be paid off first. Next, move onto your variable expenses such as groceries and fuel. You can reduce your monthly spending significantly on groceries by purchasing only what you need. When it comes to good months, you can treat yourself to some sirloin steak, a mini-break or that new phone you’ve been eyeing up. Remember, your budget is useless if you don’t stick to it!
With technology becoming so advanced, what better way to track your expenses than through apps? There are countless money management apps out there with different functions to suit your preferences. Enter your expenses and your app will tell you how you can improve your spending habits. Some apps even give you suggestions on alternatives that might save you some cash!
In addition to money management apps, you can use your calendar and notification apps to remind yourself when you have bills due. Your bank might even have an app that allows you to automate payments and ensure you’re not charged any late payment penalties or interest!
Build an Emergency Fund
When you’re on an unpredictable income, setting aside some money for emergencies is a must. Each month, put aside a percentage of your income to a separate savings account. The goal is to have at least six months of income on hand. This will be handy on a rainy day and will prevent you from going into debt. A piggy bank is an old-fashioned but effective way of accumulating some savings. Whenever you sell something you no longer need or find some change in a pocket, chuck it in! At the end of every month, deposit these savings in your savings account. You’ll often be surprised at the amount of money you find in your piggy bank.
Put Aside Money for Tax
With an unpredictable income comes a bunch of tax responsibilities. Unlike regular employment where your employer withholds tax for you, you’ll have to do this yourself. Budgeting the amount of taxes you owe can be challenging when you don’t know how much you’ll be earning. A good benchmark is to put aside 30% of your income. It may seem like a lot, but it’s better to have more than less in your bank account!
Although unpredictability can make managing your income more difficult, these tips can help you stay in control. Like anything, managing an unpredictable income can take practise. It won’t be perfect the first time, and you might even run into some debt. The trick is to never give up – you’ll get used to it after a couple of months. If you stick to all of the tips above, you’ll be a pro in no time! By managing your income properly, you can truly appreciate the money you earn.
This article was contributed by an external guest author.
Johanna Cider is a Wellington-based freelance writer whose many passions include travelling and DIY decors. Since starting her career, she has penned articles for numerous sites and blogs including, technology site Trustpower.