Whether you work in a job which pays commission or you are self-employed, fluctuation in income can make it hard for anyone to make any future plans.
Ben is often contacted by people whose unpredictable income has caused them to struggle with managing money, become unable to keep up with their repayments, and get into unmanageable debt.
But, there are ways to plan ahead by reducing stress and uncertainty that comes with living with a fluctuating income, without spiralling out of control.
Back to basics
Work out the monthly minimum amount needed. Calculate spending each month on priority debts, these include:
- Utility bills
- Council tax
Look through bank statements and work out grocery and transport costs. Also, look at how many times money was withdrawn from ATMs. This will soon add up! Be honest with yourself about how much you spend.
Next, go through your bank statements and look at how much you earned each month.
Work out an average by adding all your wages together and dividing them by the number of months. For example, if you earned…
£600 in February
£550 in March
£800 in April
…you would add those figures together and divide by three. The more months of pay you can factor in, the more accurate your result will be.
This average is the target you should try to budget to. If it’s smaller than your basic expenses then look to see if you can cut anything back or – if you’re struggling to pay bills and are getting into debt – call our helpline on 08081 311 333.
Now you know how much you have available each month and how much will go towards everyday expenses, you can sort out the extra costs.
So now work out how much you spend each month on extras:
- Entertainment subscriptions, such as Sky or Netflix
- Mobile phone bills
- Gym membership
- Clothes shopping
- Eating out/takeaways
Again, be very honest with yourself about how much you spend on each.
Remember to look at various websites and compare prices for broadband, mobile, insurance, utilities and clothing. Learn to shop smartly, as every little helps.
If the total is more than your budget then look at what you can cut back, for example limiting nights out or getting a cheaper phone. If you’re paying for membership or subscriptions, consider how often you use them and if it’s worth cancelling.
If you don’t already have a savings account, consider getting one. Having a separate account without a card linked to it will reduce any spending temptation.
If you spend under your budget, then think about putting the leftover amount into your savings. You could even budget to save extra each month to help cover large expenses such as repairs to your car.
Every month when your pay check comes in, have a look at the amount. If it’s a high-earning month, then leave the amount that you have budgeted for in your main account and move the rest into your savings. If you have earned less, top it up to your budget level using the amount from your savings account.
This way, profitable months will help you to stay afloat during the leaner times. It will also enable you to plan ahead as, in effect; your pay will stay at this average.
Keep tabs on your earnings
If you find that you’re dipping into your savings pot more than you’re putting in, then start the process again.
It’s a good idea to revisit your budget every six months or so to make sure you’re keeping on track.
Stick to it
Sticking to a budget can be tough, but there are tools to help you like free budgeting apps such as Expense Manager for Android or iPhone.
If you go over budget one month work out why you couldn’t stick to it and see how you can do improve during the next month. You can find more tips on budgeting in our downloadable helpsheet.
If you’re struggling to make ends meet– we’re here for you. You can contact us through our web chat or call our free and confidential support line on 08081 311 333.