Saving on an Irregular Income

Saving in itself is a challenging habit to maintain. And, it becomes even more of a challenge to cultivate a saving habit with an irregular income. This challenge is often faced by salespersons, entrepreneurs, and freelancers. It is difficult to draft a budget when you don't yet know how much you would earn that month or when you will be paid. It may even be challenging to ascertain if you would be earning the next month.

Having a flexible schedule and being your own boss is one of the perks of being self-employed. However, having to rely on an unpredictable income can make it difficult to meet your monthly expenses and even more challenging to set money aside for savings. It is not an easy feat to meet your monthly expenses and unplanned expenses with an irregular income. Regardless, this shouldn't stand as a roadblock in your desire to save for your future.

An irregular income refers to your earnings that are not fixed in timing and amount. Your earnings may be high some months and incredibly low some months. Apart from this, there is no fixed date to receive your income which means that you may earn this month and not earn for the next month. This can make it challenging to save and also meet impromptu expenses, which can send us down a spiral of debts. However, there is a smart way to achieve your saving goals even with an irregular income

While it might be difficult to save with an irregular income as a freelancer or entrepreneur, there are strategies you can put in place to attain your saving goals. You may find it difficult to adopt a custom budgeting plan; however, you would form a reliable saving strategy with these steps.

The first step in attaining your financial goals is actually to set them. You cannot push towards a goal when you don't have an idea of what it entails. It would be best if you took time out to outline your financial goals; that is what you want to achieve short term and long term. It would be best if you got specific with numbers; however, be sure you are setting realistic goals. It is great to push yourself further; yet, do not set a goal you cannot sustain.

You need to set financial goals so that you can track your progress. This would keep you motivated on days that it is most difficult to save.

Read also: How to Set Achievable Financial Goals

It may be difficult to save consistently with an irregular income, but it is not impossible. It would help if you stayed committed to saving to attain your financial goals. You don't necessarily have a fixed amount of money to save. Still, you need to ensure that with each income you make a substantial contribution to your savings. It doesn't have to a huge amount, but every dime directed towards your savings would go a long way in helping you attain your financial goals.

For instance, based on the service you render or the product you sell, you know the minimum amount you can always expect. You can then decide to put a particular percentage of every earning, say 10%, into your savings account.

You need to figure a pattern in your earnings. You can go through your bank statement for the last year to help you find the regularity in your earnings. The pattern you discover would inform the savings time frame you would use to help you save better.

If your earnings are received weekly or bi-weekly, then perhaps a monthly basis for saving might prove ineffective for you. If your earnings are daily, maybe automating your earnings would be a more effective strategy for you. That is, a certain amount of money would be deducted every time you are paid. If your earnings come in maybe once in two months, your saving time frame should fit this.

However, the goal remains to set a saving time frame that you can meet. However, a saving time frame would only be effective if you are consistent with saving within the expected time frame.

The typical budget strategy would prove ineffective with an irregular income. This means that your budget has to take in the fact that you have an unpredictable income. A great tip is budgeting with your lowest monthly earnings. This would ensure that your budget accommodates your expenses while still allowing you set some aside for saving. When you are enjoying better pay, you can easily channel the extra money into your savings. You may also choose to use your average monthly income as a benchmark.

You may also consider using a zero-sum budget to manage your expenses and needs. With the zero-sum budget, each penny is allocated to a specific item. The aim is to ensure that all your money is spent effectively with no single dime left. A zero-budget would limit you from overspending as each dime is already allocated to a particular need. Your savings would be listed among the expenses, and when all needs are removed from your income, you would have zero cash left.

It is true that you may have unplanned expenses, which may make it challenging to allocate each penny to a need. However, a consistent saving habit would help you to attain your financial goals and have enough money set aside for emergencies.

To calculate your average monthly income, you need to add your income over the last year and divide it by 12.

While managing your finances with an irregular income, you need to practice flexibility. That is, understand that you may earn less the next month so that you don't overspend this month. The best way to achieve this is to create a separate bank account for your saving and daily expenses.

Once you have received your earnings, split it based on your budget and have your savings safely tucked away in another account. You can also contact your service provider to automate this process so that your savings are automatically deducted from your account and transferred to a separate account.

You may not have a steady source of income; nevertheless, this shouldn't deprive you of the opportunity to save. Indeed, you don't earn the same money every paycheck, but there is a smarter way to budget with this income. You can enjoy the stability of a regular income and meet all your expenses even with an irregular income. Although you can't control when you will be paid and how much you will receive, you can take control of your finances and attain your financial goals.