Today’s Slice is for all the designers, media producers, contractors, commission workers and other brave souls who don’t fit the nine-to-five mould!
Here are five practical tips for budgeting when you don’t receive the same amount of money each month:
1 Only work with what you’ve already earned
Resist the urge to make plans for money that hasn’t come in yet. It’s hard, we know, but it’s the only way to ensure financial security.
Look at what’s currently in your bank account. Only then, ask yourself: ‘Can I afford this?’
2 Know your expenses
Money anxiety kills the fun in life. Take control by making your money work for you, not the other way around.
Use 22seven to see all your monthly expenses. See how much you spend on food, how much you spend on medical aid, how much you spend on electricity, how much you spend on your cellphone…
Having a clear idea of your expenses – and where you need to allocate your earnings – will free up headspace for your real job. Time to land that big contract you’ve been dreaming about!
3 Eliminate surprises
It might feel like your money is vanishing mysteriously every month, but in reality, very few expenses are actually a surprise. Even the random ones: You know your car will have problems at some stage, your laptop will die and you’ll need a new one urgently, your annual software subscription will need to be renewed…
Prepare for this by treating irregular expenses the same way as recurring expenses. Jot down how much a replacement/renewal/fix is expected to cost for each item that you can think of and how long before you might have to pay, then work out how much to save each month. Build up a kitty for those ‘surprise’ expenses and you’ll never be surprised again.
4 Be flexible
If your circumstances change, so will your budget. It’s not set in stone. If you earn more, you can consider saving more. Or, if things are tight for a while, you can use money allocated for your ‘wants’ to cover your ‘needs’. 22seven makes this super easy: You can change the amounts in each budget category depending on your situation.
5 Build a buffer
Your income might change from month to month, but your expenses will remain relatively constant. Prepare for this by putting money aside each time you get paid so that you can build up a buffer to cover your expenses for a certain period of time. Each person’s situation is different but start off by trying to buffer one month’s worth of expenses. Build that up to two or three months over time. You’ll know when you’ve hit the mark.
We hope these tips will help you to take control of your awesome, flexible, freelance life! Please be aware that we’ve only discussed managing expenses with an irregular income – consider discussing other important financial aspects like retirement planning and life cover with your financial advisor.