The modern economy has altered enormously over the past couple of decades. And so has the employment market. Many people who are officially employed do not know what work they will have month-by-month. This makes budgeting so difficult when they do not know how much money they will have. Budgeting with an irregular income can be done, but it takes a different approach to normal. We took a look at what is involved.
Start With What You Know
You might not know how much you have coming in every month, but you need to be fully aware of what goes out. This is the best place to start. so, sit down, and list of all your important regular outgoings. This will include all travel costs, food, bills, rent or mortgage, council tax, insurance and the other regular commitments. This helps you to budget and means each month, you can work out what you might need to earn to cover these costs.
Priorities – Bills
You need to prioritise covering the essential costs. Food must be put on your table of course. Failure to pay bills can see you with no electricity or gas, and extra fees and costs. This just exacerbates the problems of debt and not having enough money to get by. It may help you to have more than one account. Your second account can be set aside for payments for bills and the like. This means you do not dip into it for other costs, and the bills always get paid.
Budgeting With An Irregular Income – Budget For Worse Case Scenario
Always assume the worse is a depressing piece of advice to hand out. But it is a necessity for those whose income varies wildly. So take your worst month of income, and start from there. Calculate how that income can pay the bills and then work how to deal with months with extra income. In those months, calculate how best to use that money. Pay off debt, put some aside for quieter months, the choices are many. you may wish to chart an alternative path, which is to calculate annual income. If you think annually your income will remain steady, you can plan how to pay the essentials.
Plan ahead
It’s important to factor in seasonal changes in income, particularly if you’re self-employed. In some industries, Christmas is a good period, while in others the holidays are a slow time during which time little income flows into accounts. There are also times of the year when outgoings are bigger, so planning is necessary for these periods. Such occasions may include Christmas, birthdays, anniversaries and the holiday period. Additionally, those on zero hour contracts can see work fluctuate during any time of the year.
Budgeting With An Irregular Income – Save If You Can
When income is higher than usual, try and put some aside as part of an emergency fund. Then you have access to funds that can be utilised during more difficult times. Such a fund prevents you dipping into overdrafts or taking on additional debt. Many financial experts advise having at least three months of income to hand, but basically save what you can. Any amount could help you when the time arises.
Benefits
If you receive benefits, such as Universal Credit, then what you receive may well be affected by what you earn. Especially so if you are self-employed. Ensure you know the rules of your benefits, and plan accordingly.
