How to deal with irregular income
Beat the challenge of having irregular income by planning your finances.
Managing your finances can be challenging if your income fluctuates from month to month. People like self-employed business owners, freelance writers, new entrepreneurs and contractors need to plan how their money will last until their next payment comes. While this can be difficult, the following tips may help you gain stability and security in your finances.
Create a budget
Having a budget is crucial to ensuring you have enough money to cover your essential expenses and build up your savings. A budget tracks your spending on a weekly or monthly basis and factors in your income (taking into account fluctuations), expenses and financial obligations. It may help you set limits on your discretionary spending – such as eating out and unnecessary shopping – to help you stretch your income. Perhaps most importantly, it may keep you from over-spending when your next payment comes through.
Build your contingency fund
Everyone needs a contingency fund to cover unexpected events such as unforeseen medical costs. But having money socked away for emergencies is even more important if your income is unpredictable.
This money may help you stay afloat during periods of little or no income.
Increase your income
You don’t have to fully rely on your job or trade for income. If you have enough savings on top of your contingency fund, you may want to consider investing a portion of your money. Your professional financial adviser could recommend strategies to help you generate an income from your investments.
Boost your retirement fund.
You may not be considering retirement savings when you have irregular income, but it’s vital for your financial security. If you’re looking to bolster your superannuation account, the ‘catch-up’ scheme helps eligible individuals increase their super savings by allowing them to make catch-up concessional contributions. From 1 July 2018, members with a total super balance of less than $500,000 can ‘carry forward’ any unused amount below the concessional contribution cap on a rolling basis for five years.Before you decide to make a contribution,it is wise to get professional financial advice so you fully understand your contribution options.
Get insurance protection
Consider taking out insurance to protect your income should a sudden illness or injury prevent you from earning.Income protection insurance may provide a monthly income while you’re unable to work. But depending on your job, different types of income protection insurance have different benefits and employment requirements. Speak to your financial adviser to see if such a policy might work for you or how you may tailor a plan to meet your income protection needs.
This article originally appeared on Adroit Insurance & Risk Blog and has been published here with permission.