Guest post from Lisa of FreelanceMom.com
Do you work in a career where your paycheck is unreliable?
Maybe you're a freelancer. Perhaps you work on commission. Whatever your job, living without a regular paycheck can put strain on your budget, and it can be hard to determine how to save and how much to save to cover slow months.
Curious how to make your budget work efficiently like many moms before you? Check out these tips for saving your money when you don't have a regular paycheck:
1. Automate Your Savings
Don't jump to scheduling automatic transfers from checking to savings right away. If you've tried this before, you've likely found that this type of automation process doesn't always work that well.
You may want to put $50 away in savings every week, but sometimes you simply don't have the extra cash. Other times, you have plenty of extra to contribute to your savings… but keeping a constant eye on things and making manual transfers can be a pain.
The good news is that there's an alternative! Digit is an automatic savings program that's perfect for moms whose income varies from week to week.
This free program tracks your spending habits and monitors your checking account. Then, it stashes away a couple of dollars when you can afford it. It's totally free and takes the manual guesswork out of savings!
2. Determine Your Average Income
As a mom without a regular paycheck, some months may yield twice as much money as others. It can be all too tempting to splurge during those months, yet when a slow month comes around, you feel the pressure.
That's why it's important to outline a budget for yourself. Your starting point is how much money you average every month. Take a look at your income over the last year and divide it by 12 months. You shouldn't be spending any more than that in any given month. Ideally, you should be spending much less than your average so you always have something to put away in savings.
Decide on a budget lower than your average, and stash extra away. That way, you'll have enough to cover slow months as well as emergencies and larger expenses.
As you're looking over your income, take the time to evaluate your spending habits as well. If your monthly expenses are pushing your average income, look for ways to cut down so you have more to contribute to savings.
Don't forget to calculate business fees into your monthly expenses (if you're a freelancer). These would be things like office supplies, PayPal fees, and taxes.
3. Pay Your Own Salary - In a Sense
The strategy outlined above - tracking your spending and depositing extra into savings - works for some people, but for others, it seems like a backward process. So instead, take control of your income.
Start by having all of your paychecks deposited into your "business" account. Then, set up automatic payments to be made into your "household checking" account on a weekly or biweekly basis.
The total you transfer each month should not exceed your average income, since you still want money in your business account, particularly at times when pay is slow. You can also set up automatic transfers from your "business" account into your retirement or savings accounts.
If you use this method, you can better manage your money as if you had a regular paycheck, making budgeting for the month a lot easier.
4. Open New Bank Accounts
One thing that makes it easy to overspend is when your money feels accessible and spendable. If you have only a checking and a savings account, you may find yourself withdrawing too much because the money hasn't been set aside based on your financial goals.
Instead, open up new sub-savings accounts so you can put a name to each dollar you earn. The goals for each account are up to you, but at least you know the money in that account is reserved for a specific purpose, which will help keep you from overspending all while promoting better savings habits.
Some reasons you might open sub-savings accounts include:
- Taxes
- New car
- Car maintenance
- Retirement (consider opening an IRA)
- Emergencies
- Rent/mortgage
Living without a regular paycheck isn't synonymous to "living paycheck to paycheck." It's still possible to budget your money and do it effectively, even when you can't accurately estimate your future income.
Are you struggling to save on an atypical paycheck?
Let us know what method you'll try first to start growing your savings!
Lisa Stein Chang owns FreelanceMom.com, is a college business professor, and a mom to two growing daughters. Lisa is dedicated to playing a part in helping moms run a business they love, help support themselves and their family, and create a "flexible" lifestyle. You can find Lisa burning something in the kitchen, on her blog or fumbling around on Twitter and Facebook.
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