Managing An Income Which Changes From Month to Month
If you’re working as a freelancer or are paid almost entirely on commissions, you’ll be one of the people who have a variable income and therefore need a slightly different approach to money management. Money Magazine recently put together some tips for those living on a flexible income which could help you out.
- Figure out the lower limit of your income and make a budget to suit. For example, look at your income over the last five years (if you’ve been paid “flexibly” for that long) and take the lowest income level. Make a monthly budget that you could survive on at this income level.
- Have a larger emergency fund than others - while fixed salary workers generally should have three to six months’ expenses as an emergency fund, the risks of earning less for a freelancer is higher and they should have enough cash saved to survive at least twelve months.
- Save for your retirement - this is often neglected by freelancers who don’t have an employer making contributions for them, so get some financial advice on the best way you can do this and make it a priority.
- When you earn money above this minimum rate, use it carefully to achieve other goals you have - for example, paying down debt like credit cards or car loans.
This entry was posted on Thursday, December 4th, 2008 at 4:55 am and is filed under Budgets & Money Management. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
