There are many reasons why you may have an uncertain income: being self-employed, doing some freelance work, casual projects, working on commission, moving to another country, or even unexpected layoffs because of global pandemics such as covid-19. Depending on someone’s working situation, their earning potential can vary drastically between months. There are many factors which may influence uncertain income. However, it is still important – and possible – to manage money even when receiving an uncertain income.
Identify Your Essentials
In a previous blog post about budgeting, we highlighted the importance of knowing your income and expenditures. Of course, with an uncertain income, planning your budget around an uncertain amount of money becomes a bit more difficult. Figuring out the bare minimum of how much you will need to spend on your basic living necessities – like food, shelter, clothing, and transportation – should be your first step. With this knowledge in mind, you will have a better understanding of how much money you will need to set aside every month, irrespective of your uncertain income.
Saving money for rainy days (or months) is important for anyone, perhaps more so for individuals with uncertain income. Many experts generally suggest saving for three to six months of monthly expenses in the case where your income may be lowered or completely stopped. Building an “emergency fund” may be difficult when your income is uncertain. This is exactly why it is so important to save a portion of your earnings. Consider putting away a certain percentage of your income towards your savings. There will be months where you earn more, so try to save more money instead of recklessly spending it all. You’ll be thankful when a bad month comes around.
Balance out the Highs and Lows
Even if your income is uncertain, you should have a general understanding of what your average income is. Sometimes, you may earn more than your average income; other times, you may earn less. Consider these high and low months and set aside some money whenever you earn more than your average income. Having this separate fund will allow you to keep your emergency funds safe whenever you experience a low month of earning.
After sorting out your essential expenses and allocating a percentage of your income to savings. It is recommended to set aside some money for unexpected situations. This money can be used as a safety net so that you will be covered when sudden expenses arise. For example, a friend from out-of-town suddenly decides to stop by and wants to catch up over a fancy dinner; this is certainly a sudden expense. If there are no miscellaneous expenses at the end of the month, the remaining money should be put aside and saved.
Learn How You Budget Best
Balancing an uncertain income is no easy task. Don’t be too hard on yourself if you aren’t able to make the actual numbers match with your plan. Getting into the grove of budgeting – let along budgeting on an uncertain income – takes time, practice, and dedication. Find out what works best for your lifestyle and change how you use your money. After a while, you will be managing your money like a professional.
Your income may be uncertain, but your finances don’t need to be!
Looking to Stabilize Your Income?
Internationally Trained Individuals (ITIs) who are in Alberta and Saskatchewan who are looking to return to their original career fields may be eligible for the free online services provided by Career Loans. Our expert counsellors will help ITIs navigate the foreign credential accreditation processes so that you can get back to doing what you were trained in – and get back to a stable income.
Find out if you are eligible at www.careerloans.ca