Effective Ways to Manage Variable Income
Understanding where and how much your money goes is imperative to stay on top of your money, especially if you are on a variable income. You could have extremely high earnings this month and, the following month, a very low income.
It is not surprising that you will be tempted to spend more than your capacity one month and end up running out of money to meet even essential expenses the following month.
Not to mention, you should find your average income and expenses. Look over your bank statement for the previous six months to analyze how much you earned and how much you spent.
Since monthly income varies each month, determine the average income by dividing the total amount by six. Follow the same formula for expenses as well. There is nothing to worry about. Your income covers all expenses, but if not, you will have to trim down more.
This is the basic thing you are to do while being on a variable income. In addition, you should do the following things:
- Track your expenses
Much as you have set the limit for monthly expenses, you still are supposed to track your expenses. This ensures that you do not overspend money. Manual budgeting can help keep tabs on your expenses, but you can use a budgeting app as well.
The only difference is that you do not need to do the entire hard work when you use a budgeting app. You will find all expenses in one place as soon as you link the app to your bank account. However, entries for cash transactions are needed to be put in manually.
- Set up an emergency cushion
Your budget must have a scope for building an emergency cushion. As the name suggests, this corpus will aim to help tide you over when unforeseen expenditure crops up. You can avoid hinging on loans every time you need extra funds when you have an emergency cushion.
However, if your rainy-day savings fall short of cash, loans with guaranteed acceptance in the UK can help fund your needs. Make sure you keep contributing a fixed amount of money every month to your emergency cushion.
Try to set aside a portion of the money as soon as you receive your paycheque. If it slips through the cracks, link your savings account to your payment account and opt for an automatic transfer option.
- Readjust your budget
Because you are not on a fixed income source, you will have to reassess your budget periodically. Calculating average spending is not sufficient to ensure you will stay on top of your expenses.
It is likely that your income will go down dramatically and that you cannot meet all of your expenses. Now it calls for a reassessment of your budget. How you have been managing money to date will no longer help cover all of your expenses. Reframe your budget according to your current needs.
You may need to whittle down your discretionary expenses. Focus on your variable expenses like electricity, water, etc. Consume electricity as per your needs. Utilize water frugally at the time of washing dishes.
- Focus on growing your income
Not to mention, you will need to grow your income if you are finding it hard to get by. Grab a part-time job, or you should look for more freelance projects. The more work you get, the more money will come in. Focus on the prices you charge as well.
It is likely that you would be undercharging for the work you have been doing for your clients. This happens in the freelancing field. You get a project on a bidding basis, so you can make a lower bid to give a competitive edge, but this will work against you.
You will likely get work but fail to cover all of your expenses. Consider revising the pricing strategy. As the cost of living is going up, you will need to increase prices. Some people do not realize its importance until they face a frequent need to take out 1,000 pound loans for bad credit.
- Pay yourself first
An emergency cushion will help cover the cost of unexpected expenses, but there are various expenses that you need to plan for – Christmas gifts, saving for a car, and preparing a budget for buying a new laptop are some of them. You cannot rely on an emergency cushion for these expenses, and the reason is simply that they are planned expenses.
Therefore, it is vital to pay yourself. Keeping aside emergency expenses will continue alongside making a budget for your planned expenses. Now Christmas is coming, and you will surely need money to pay for decorations, celebrations, and gifts.
Having some money set aside for the celebration will help paint the town red. However, if you still need some money, you can take out Xmas loans for bad credit in the UK.
Financial experts suggest having some money stashed away for these expenses will lower the need for a loan, which means you will save some of your money going on interest.
It also includes saving for retirement. At the time of the golden years of your life, you will not be working. That time you would need to dip into the pension fund. Start saving money for your retirement as well.
You will have to choose a certain figure you need to lay aside every month. Consult a financial expert if you do not have an idea of what to do.
The final word
If you are on a variable income, it can be challenging for you to stay in control of your money. However, it is still possible. You just need to understand the pattern of your outgoings and incomings. Make a budget, adjust and readjust it so you stay on top of your expense. This will also help you avoid taking out a loan every time for your expenses.
Ailsa Adam is the Editor-in-Chief and former content head at Hugeloanlender. She has been a valuable member of the content strategy team since 2017 due to her abundant experience in the finance sector. Passionate about helping individuals navigate the world of loans and personal finance, she has dedicated herself to acquiring extensive knowledge on various financial products. Before her role at Hugeloanlender,
Ailsa worked as a seasoned journalist and writer, specialising in creating informative blogs and articles on diverse loan types. She is known for her meticulous research and commitment to delivering accurate and engaging content. She holds a degree in MBA Finance and has a keen interest in creative writing and art.