How to budget with a fluctuating income

If you’ve ever lived off of tips or commissions, you’re probably familiar with the fluctuating paychecks that are common in certain industries. Service jobs, sales jobs, creative careers, and project-based work can all have fluctuating earnings due to seasonality, events, or the general economy.

When you can’t rely on a consistent paycheck amount or timing, it can be difficult to know how you’ll make ends meet when money is scarce. However, with some planning, budgeting, and creativity, it is possible to weather a fluctuating income.

Make a spending plan.

Lawrence Sprung, a certified financial planner and author of “Financial Planning Made Personal,” works with several romance novelists as financial clients. These authors are supported by book deals and royalties, and their budgets vary depending on their publication cycle. Sprung and his firm assist these clients in determining their expenses so that they can determine how much money they need to save, he says. Even if you don’t have a CFP, there are steps you can take on your own to get your budget on track.

“Having an emergency fund set up is one of the key components of an unpredictable income stream,” Sprung says. “We usually recommend six to twelve months of income so that when work slows down, they have money to live on.”

A six-to-12-month emergency fund may appear to be a lofty goal, but you can begin small, and anything is better than nothing. After you’ve determined your essential expenses, you should begin saving for retirement and other long-term savings goals, such as your child’s college education. And, of course, determining how much you can and should save requires determining how much you spend.

Keep track of your spending for a specific time period.

As the saying goes, “what gets measured gets managed.” Track your spending to see how much money you need for necessities and where you can cut back if necessary. This is especially useful for people with inconsistent incomes because some seasons, nights of the week, months, or projects may bring in significantly more money than others. This budgeting technique can benefit the majority of people.

“Budgeting is important for everyone, no matter what kind of income you have,” says Sprung. “It’s worth looking at where your money is going at least once a year so you can make changes.” You don’t have to make it difficult. In fact, the more straightforward it is, the better.”

If you’re new to budgeting, tracking your spending each month might be a good place to start. Once you know where your money is going, you can usually find areas to cut back on, such as dining out, so that you can divert more money toward other goals, such as debt repayment and savings, especially for things like retirement or a house. Keep in mind that if taxes aren’t already deducted from your paycheck, you’ll need to set aside money from each paycheck for tax season.

Use your imagination to cut costs and increase income.

Barbara Sloan, a personal finance coach and author of “Tipped: The Life-Changing Guide to Financial Freedom for Waitresses, Bartenders, Strippers, and All Other Service Industry Professionals,” has worked in the service industry and written about it. According to Sloan, the amount you save as a service worker depends on increasing the gap between what you make and what you spend. Sloan suggests that when it comes to spending cuts, people start with the “big three”: housing, transportation, and food. However, spending cuts can only go so far, so Sloan encourages service workers to consider the other side of the equation and think creatively about how they can earn more money.

“In an employee market, one of the easiest ways to make more money is to hold multiple jobs or find a new job within the industry,” Sloan explains. “There are numerous opportunities to earn more money depending on where you live, what your role is, and what establishment you work for.”

Whether or not you decide to take on a second job, Sloan says one of the most important things you can do is make the most of the resources you have, such as collaborating with your manager for more training on points of service, upselling tips, or resources they can offer to help you create more meaningful guest experiences. She also claims that you can make more money at work by taking on more shifts, and that your relationships with your coworkers are a valuable resource.

People with fluctuating incomes can improve their financial security by following these tips, as well as tracking and maximizing income and being conscientious about spending and saving.

“If hard work was all it took, every waitress would be wealthy,” Sloan says. “It takes understanding the financial systems and managing your money accordingly.”

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