How to Make Spending Decisions When Your Income is Unpredictable

We can’t change the fact that you don’t know exactly when or how much you will get paid, but we can teach you to be in total control of your money, and stop stressing about it! This eight-part series will teach you exactly how to budget successfully and get ahead, variable income and all.

Everyone needs a budget, but if you are riding the variable income roller coaster, you need one the most.

We can’t change the fact that you don’t know exactly when or how much you will get paid, but we can help you get to the place where you don’t have to stress about it so much, because you’ve already taken care of your most important needs, regardless of what comes in this week or next. Which would change the game, right?

Today, in the second installment of our eight-part series on budgeting with an irregular income, we’re going to talk about pay cycles. And how you can be in total control of your money even if your pay cycle and your budget cycle don’t align.

“Can I Afford It?”

When it comes right down to it, your quest for control likely revolves around a question that everyone asks themselves: Can I afford it? It’s the answer to this question that feels so elusive.

When your income is up, it is tempting to feel like, “Of course! I’ll take two!”

But when it is down, you are stressed. You risk passing up good investments and new opportunities out of fear. Speaking of fear, your bills! It feels like you’re just guessing (you actually are just guessing!) and there is a price to be paid for your frequent mistakes. Both literally and figuratively.

Here’s the big idea: Your pay cycle and your budget cycle (the world works in months!) don’t have to align perfectly in order for you to be in total control.

The first step toward answering the question of what you can afford actually begins with another question: What does this money need to do before I am paid again?

What Does This Money Need To Do Before I Get Paid Again?

Get comfortable with this question. It’s your new best friend. Chances are your first response will be very practical: You’ve got to pay your rent and you’ve got to eat. You’ve got to keep the lights on and pay your phone bill. And internet. You need internet.

Taking care of these expenses isn’t the fun or sexy part of budgeting, but these expenses have to get nailed down first, and chances are they’re coming due pretty soon. That’s why they’re immediate obligations, and there are two reasons why you need to protect the funds to cover these immediate obligations right now.

First, you can’t go hungry and you can’t have the lights turned off. You may be chasing a dream, but you still live in the real world and you have to be practical.

The second reason is deeper and more important in the long run. Worrying about these immediate obligations is taking up way too much head space. You may not realize how stressed you are about money, because it’s all you’ve ever known. But if you don’t know with certainty that this month and next month’s rent is covered, it’s probably getting in the way of other things that need your focus.

Don’t Underestimate The Drag of Money Stress

Every little bit of stress about your electric bill is a bit less creativity you have to put toward landing your next client, or making the next sale.

And that’s what makes budgeting so critical for anyone with a variable income. Yes, everyone needs to budget, but with variable income, financial stress clouds your thinking, and impacts your decision-making to a larger degree. It gets in your way like a five-foot hurdle instead of a small bump in the pavement.

Give Every Dollar a Job

There is one simple habit that can reduce this anxiety: Give every dollar a job.

Look at your bank balance right now. Don’t think about what job you just landed or what checks you are expecting, just what you have right now. Now ask yourself, “What does this money need to do before I’m paid again?”

How many dollars need to pay that electric bill? Write it down. How many need the job of stocking your refrigerator? Write it down. You may suddenly realize that pile of money is smaller–or bigger–than you thought it. But by answering this simple question, by committing it to paper (literally or digitally), you’ve started to take control. You’re already more prepared to answer the ever-present question, “Can I afford this?”

Beginning to think longer term (even if only a week or two longer to begin with) will increase your sense of control. The more control, the less stress. Control is the goal.

Next post: Part 3: The Dangers of Forecasting on an Irregular Income

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