How do I Budget With A Variable Income? With Bevin and Garrett
The number one employer of clients at The Financial Gym is self-employed, meaning many of our clients have a variable income. In addition to self-employed folks, many other professions earn an inconsistent income. On this episode of Financially Naked: Stories from The Financial Gym, our hosts are two Certified Financial Trainers, Bevin, and Garrett, and they are here to talk about how to budget when you earn variable income!
Podcast Notes
There are many professions where people are paid on a variable income: freelancers, business owners, gig workers, and hourly workers.
This presents unique financial challenges. Planning, budgeting, and getting ahead can be challenging when you’re unsure how much money you’ll make. This also includes the mental energy it takes to lean on your own self. There will be slow months, and you must prepare financially and mentally.
Where should I start if I make inconsistent income?
Step one is to know how much your life costs, aka, get honest about your baseline expenses. Take some time to get a clear and accurate representation of how you live your life. You can track for a month or a whole quarter.
The goal is to create consistency out of inconsistency. Build a 'paycheck system' where you regularly pay yourself a certain amount of income. This can take some time but will help you with the ebbs and flows of inconsistency.
If you are a freelancer or business owner, create a clear separation between your business and personal expenses. Your revenue will go into the business account, and you will pay yourself a paycheck from that account.
Keep track of your money. Whether you use an app, spreadsheet, or pen and paper, knowing how much is coming in and going out regularly is essential.
If you are a freelancer, keeping track of your business expenses is extra important for taxes.
How can we use automation with variable income?
Automation is the key to financial success. Humans only have the energy for so many decisions each day. Automation helps you make fewer decisions and keep you on track financially. Even with variable income, there is automation you can set up.
When you’re starting out, time is the most valuable resource. Find the systems that work for you so you can free up more time.
As a freelancer or business owner, taxes are the most important place for automation. Each time you get paid, have 20%-30% deposited into an account just for taxes.
Tracking expenses is an excellent opportunity for automation.
Tips for folks who earn an inconsistent income:
This whole ecosystem can feel overwhelming and complicated. If you’re new, start with the basics and level up over time.
It’s okay if mistakes are made, even with taxes! Everything we do financially is fixable.
Keep track of your money. Make sure to keep your business and personal expenses separate.
Find the systems that work for you. Try things out and continue to evolve. You will find your stride, even if it takes some time and experimentation to get there.
Always remember to focus on building the life you want and your happiness.
If you want to work with a Certified Financial Trainer to help navigate your finances, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.