It’s difficult enough to balance your budget with a steady income, but can be really stressful when you aren’t making one. Here are some helpful tips to manage your budget when you don’t have a steady paycheck.
1. Know Your Income-to-Expense Ratio
Understand how much money you have coming in and how much is going out. If you have to, sit down and gather all of your expenses from the past three months to help you get started. Write down your net pay (take home pay) and then how much you’ve been spending on essential and non-essential expenses. If you are spending more than you are earning, then you might want to cut back a little. If you stick to a steady budget and have a good financial balance, then you won’t ever find yourself scrambling for money when your bills come in and you’re between jobs.
2. Stick to the 50/20/30 Rule
The 50/20/30 rule consists of fixed expenses, goals and discretionary (flexible) expenses. You want to dedicate most of your take home pay to your fixed expenses – regular bills, groceries, car payments, etc. You might want to put the next 20% of your paycheck toward your future goals. Do you have any upcoming events that are costly? For example, you might be planning a wedding in the next year or two. You want to make sure your goals and budget run in parallel tracks. If your goals ever change, then you will find yourself going in and adjusting your budget. Don’t let both of these crash as it will only put a large dent in your wallet.
The golden rule is to put 30% of your net-pay towards discretionary or flexible expenses. This could be eating out, hobbies, going to the gym, entertainment, etc. I recommend trying your best to never reach that 30% mark. If you always are spending 30% or more of your pay on non-essential items, you may lose track of your spending and find yourself in debt in the future.
It’s also a good idea to keep your credit card balances low as higher debt ratios can have a negative impact on your credit scores. You can see how your spending is affecting your scores by checking your two free credit scores, updated every 14 days, at Credit.com.
3. Have an Emergency Fund
Maintaining a financially stable life on an irregular income can be difficult. You never know when you might be in transition or out of a job for a short time. Try to always have a back-up option. An emergency fund can help you stay prepared for unexpected expenses. Even if you know you will always have money coming in, you never know when a large, unexpected expense will come up. An emergency fund will help you stay on top of your finances and always prepared for the unexpected.