From those who are self employed or choose to be independent contractors and work as freelancers, consultants or perhaps have a commission based job, you know just how daunting it can be to consistently budget your income. One month to the next, the amount you make can fluctuate and thus lead to the unknown as far as what expenses you can cut, how you can plan to save money or just an overall, clear cut view of your finances. But just because you’re not sure how much you make doesn’t give you the option to not have a budget, to not be aware of what you’re spending and, most importantly, how to save. There’s no real clear cut way to budget with this type of income. If you’re a salesperson, and you make an hourly wage on top of commission, the hourly is a given since you know how many hours you work, and the commission just might have to be something you annualize versus a previous, comparable year and thus divide it up over 12 months. Granted, that isn’t the answer you might want, but in these cases, you have to make your best guess. Part of budgeting, too, is the propensity to want to underestimate how much you spend. In this case, you have to really stay away from that mentality. If anything, when your income isn’t set in stone, you have to make it a point to be a little more cautious and underestimate your income as a whole. By doing this, you’ll allow yourself to do two things: you can have money set aside to save if you have a particularly “good” month as far as earning more commissions or your income is particularly high in one month. Furthermore, it allows you avoid something that is all too common when you aren’t sure of your income from one month (or week) to the next: missing payments or having to wait to make a payment. That is something you simply want to avoid at all costs, which is why when budgeting on an income that isn’t a given, you shouldn’t be over budgeting or assuming that your best month as far as what you make is going to be your starting point. For example, if you’re pay centers on how much volume you put out (such as a writer), and your best month is a $2,000 paycheck, and worst is $800, then you might want to split the difference or make a budget that takes into consideration why one month is so much different than another (maybe something like less work being done during the holidays, for instance). In any event, a variable income doesn’t have to mean you can’t save or spend like those who have a two week paycheck that is on point. It just means you have to work a little harder to make your budget that much better.
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