Boss Lady

6 tips for budgeting on irregular incomes

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In the world of business, professional freedom unfortunately tends to come with added hassle. Becoming self-employed or starting your own business is always at the expense of having to organise every miniscule detail yourself. In particular, it means being incredibly responsible with your bankroll.

I’ve ended up pursuing two career paths with notoriously fluctuating incomes – freelance writing and professional poker. Though my skills allow me to feel confident in acquiring fairly consistent winnings, there’s always an element of chance involved. With the exception of freeroll games, professional poker is also a career which requires you to spend money in order to make money, thus the risk of using up all of my allocated ‘poker funds’ for the month before having won anything is a risk I have to consider when budgeting.

It’s a different ball game when you have regular clients – either as a freelancer or a business owner. The nature of freelance work, however, means your contract can often be subject to sudden termination. It’s not a particularly comforting thought. Nor is it comforting to have clients who ask you to work twenty hours work one month, but only two hours the next. The relief of earning a nice sum of money after having struggled a while can also sometimes tempt us into the dangerous habit of spending everything at once. Consistency and routine feels more safe and manageable for most people – it’s as simple as that.

So is being self-employed really worth all the stress? I certainly think so. There’s nothing like the freedom of working your own hours, choosing your own clients and setting your own goals. Despite all the aforementioned concerns that affect many people with irregular incomes – good bankroll management is perfectly possible if you’re determined enough. Below are some tips for how to make it work.

 

Research, research, research

How do other professionals in your industry manage their bank roll? Do there exist specific budgeting templates for your kind of business? What does someone in your line of work typically earn, and how much of that do they put back into their business? Google is your best friend when it comes to staying informed on what to expect with regards to earnings and spending. Join forums and chat with experts in your field to gain a general comprehension of realistic finance goals.

 

Be strict

The moment you start slacking, the accuracy of your budget takes a serious hit. Effective finance managing requires absolute dedication and organisation. You think it’s no big deal if you forget to record one small instance of spending? Forgot to account for a small decrease in next week’s earnings? Everything adds up, and everything needs to be recorded. Whatever method you use to keep track of your finances – make sure you use it often enough for it to become a natural habit.

 

Get an idea of your past spending

This is a general rule for any kind of budgeting – take a look at your bank statements and identify where you put most of your money. Look for instances in which you could have either reduced costs or cut them completely. This will give you the obvious benefit of knowing where your money goes and how you can spend more carefully in the future.

 

Calculate money earned vs. hours worked

It might seem like an obvious point – but it’s one we self-employed tend to forget. Having worked for a company whereby we had a fixed hourly or monthly rate, the idea of getting paid different sums of money for different kinds of work might seem foreign. Knowing the value you get out of your work is vital, however, if you are to budget accurately and find ways to maximise your earnings. It will also help you predict your future earnings if you ever end up decreasing or increasing the amount of work you do. Above all, it will help you realize which aspects of your business are the most lucrative, and perhaps pay those aspects more attention. You might find that one client pays you generously for certain tasks, but those tasks are few and far between. Another client might pay you considerably less for a similar job, but there’s a lot more work to be done. Which will end up earning you more money in the long run? Immediate earnings aside, which will give you the best experience with which to develop your professional credentials and therefore be able to take on more lucrative work in the future?

 

Prioritize for worst case scenarios

What’s the absolute minimum you could end up earning in a month, based on the nature and volume of your work? Categorize your general expenses into essentials and luxuries, then ensure that your predicted minimum earning at least covers the cost of all essentials on your list. This will give you a peace of mind that puts you in control. It is also good to have considered what ‘essentials’ and ‘luxuries’ are for you. For some people, a few drinks with friends is a luxury that they happily go without, if needs be. For others, a social night out is an absolute necessity for their mental well-being. This is perfectly reasonable — but if your irregular income doesn’t guarantee you can always cover such ‘essentials’, then you might not be ready for self-employment.

 

Start saving seriously

The world of self-employment is an unpredictable and sometimes daunting one. No matter how immaculate your budgeting templates are, or how carefully you have calculated your bankroll, there will always be the risk of some factor turning the whole thing upside down. As a precaution, the most sensible thing to do is to take your savings seriously. Always account for money put toward savings when you budget, and avoid the temptation to dip into your savings for anything which isn’t an extreme scenario. You’ll thank yourself in the future, when an unexpected expense comes flying out of nowhere, and you can relax in the knowledge that you’re able to tackle it.

About Sophie Jackson

Sophie Jackson is a freelance writer and poker player who also organises major poker events around the globe.

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