By Philly Saves
Does your income fluctuate? Sometimes that may mean more than usual, and other times it may mean less than usual. It can be frustrating, but it does not mean that your financial plans are not manageable! Here are some tips that will help you to manage your money when your income fluctuates.
- Track your spending to find your monthly baseline. Calculate the monthly amount for your “have to pay” bills. The baseline expenses typically include housing, utilities and groceries, among other things that are necessary each month. Knowing the bare minimum needed will help you to create a manageable budget with a fluctuating income.
- Know your average monthly income. Start with reviewing your income from the last two years. While your income will fluctuate from month to month, knowing the average will help you to avoid overspending or making large purchases that you cannot afford. Compare your monthly average income with your monthly baseline expenses. Is there a gap between your baseline and your income? If so, what budget cuts are you able to make close the gap?
- Create an income-flux fund for any additional or unexpected income you may receive. For example, if your income is typically $1,000 per month, but you receive an additional $500 as a bonus or for overtime pay, place the extra cash into your income-flux fund. This money should be used to cover expenses when your income takes a dip or is less than usual. Your income-flux fund should be a separate account from your emergency savings fund.
- Make prepayments to your bills whenever possible. This is a great way to manage your budget and expenses if you receive most of your income or additional income during specific times of the year. Paying a few months of rent or car payments in advance can make a huge difference during “slow seasons” when your income will decrease.
Overall, managing a fluctuating income requires planning. You certainly have to plan for the future and predict (as best as possible) when your income will increase or decrease. For example, take note and plan for the time of year you will receive a bonus or commission. If you are a contract employee plan and save for the months after your contract will expire. Look at the trends and ask your employer as well.
Your goal is to plan for the immediate future while working on a long-term savings goal. While it takes time and practice to find the best strategies and tools to manage your fluctuating income just know that it is POSSIBLE!
Helpful Resources
From America Saves
Resources
Blog Articles
- 4 Ways to Save Money With a Fluctuating Income
- 5 tips for turning your passion into a side gig
- How to Start Planning for Retirement if You Haven't Already
- Social Security: Encourage Young Workers to Check Their Benefits
- Split Deposit: The Workplace Perk that Will Help Employees Build Wealth
- You work. Why not let the EITC work for you?
Resources and Research
Internal Revenue Service (IRS)
- Sharing Economy Tax Center
- Free File: Do Your Federal Taxes for Free
- Free File Fillable Forms
- Free Tax Return Preparation for Qualifying Taxpayers
Retire on Your Own Terms: https://www.retireonyourterms.org/
About America Saves:
America Saves, a campaign managed by the nonprofit Consumer Federation of America, motivates, encourages, and supports low- to moderate-income households to save money, reduce debt, and build wealth. The research-based campaign uses the principles of behavioral economics and social marketing to change behavior. Non‐profit, government, and corporate groups participate in America Saves nationally and through local, regional, and statewide campaigns around the country. America Saves encourages individuals to take the America Saves pledge and organizations to promote savings year-round and during America Saves Week.
About the Personal Investment Enterprise (PIE) Program:
The Personal Investment Enterprise (PIE) program is a local savings program provided through Community Action Programs of Boulder County and Foothills United Way. The program is designed for low-income families to enroll in financial literacy classes and save through a matched saving account at a rate of 4 to 1. The first step in applying to the program is to attend an orientation meeting with Nino Gallo at Community Action Programs at Boulder County. Nino may be reached at 303-441-3998 or at [email protected].
