For self-employed individuals, salespeople, and freelancers, budgeting is a real challenge. Given the fact that you do not know how much are you going to earn next month or when you are going to receive the money. However, people who are in this category can attest to the fact that the issue of fluctuating income does not stop them from enjoying a simple yet happy lifestyle.
The key is learning to manage your money well. We rounded up a number of effective budgeting strategies to help you:
Set up your baseline
List down all your minimum expenses for a month. These expenses are your absolute essentials for house rental/mortgage, groceries, transportation, utility bills, and childcare (if you have children.) Next, list other important expenditures like savings, debt repayment, and investment.
Live on previous month’s income
Now, that you have a budget, you need to stick to it. As soon as you receive the money, deposit it into your short-term account or checking account. This will be your lifeline for the whole month. You will withdraw the amount you need to pay your absolute essentials and when you got it all covered, the other expenditures follow. By practicing this “zero-sum budget”, you are being smart in handling your finances.
Create an emergency fund
To keep stress away, you need at least three to six months’ worth of monthly expenses in your savings account to help get through when unexpected things happen like job loss, health issues, and other major life’s emergencies. This money will keep you floating during bad months.
Start allocating a certain percentage of your income (weekly or monthly) into a separate account.
Save for the future
For your long-term goals, you need to start saving now. It doesn’t matter if your income is substantial or just an average, the most important is you are building your golden egg nest. Set aside a specific amount each for this and see it grow.
You need to be a wise spender especially when you have an irregular or fluctuating income. Budgeting keeps you in control of your money and your life.