How to Budget When You Don’t Have a Steady Pay Cheque

It’s not news anymore that more and more people are ditching the 9-to-5 to look for a more fun, engaging and rewarding  work experience, be it entrepreneurship, freelancing or seasonal work. But with the rewards, naturally, comes a downside – the often unstable monthly pay cheque. So how do you handle the ebbs and flows of this type of income? It’s really quite simple.

  1. Define your worst-case scenario

    It’s important to know what’s the minimum amount of money that you need to get by when times are tough. How much do you need to keep the food on the table, the lights on and the business running? Knowing is always better than being afraid of the unknown, so even if it’s not a small number, at least you know what you have to work with and that will help put your saving and spending into perspective.
  2. Pay yourself

    You probably chose your lifestyle because you wanted to become your own boss. So now’s your chance to be one by giving yourself a salary as if you were paying an employee. Set yourself a monthly pay cheque based on what you know you need to live off and stick to it. If business is good, stock the surplus away so you don’t have to sacrifice your salary when you hit rough water. Also, depending on your situation and the legislation of your country, the taxes you will need to pay as a self-employed professional may vary greatly, so make sure you do your homework.
  3. Stay in control with spending categories

    Consider dividing you spending into 4 main categories – savings, bills, everyday living costs, and splurges. That way you will have a clear understanding of your financial status. And yes, setting money aside for your splurges is important so you don’t feel like all you do is pay bills and save up, yet you eliminate the chance of accidentally spending the money set aside for bill payments on a night out.
  4. Prioritise your splurges

    When spending the free-to-spend splurge money, base your decisions on your values. Simply ask what’s important to you. As a financial blogger Paula Pant says, “You can’t afford everything, but you can afford anything.” This sums up perfectly the need to prioritise what you spend your hard-earned cash on. Nobody can afford absolutely everything, but you probably don’t want to either.
  5. Resist lifestyle inflation

    The tips above should help you avoid lifestyle inflation, where you’re riding high one month only to have to eat ramen noodles until your next client pays up. When it comes to improving your lifestyle, being your own boss also means you only have yourself to negotiate for higher salary. So look for alternative sources of income for your endeavour, see how you could make your processes more efficient so you could do more in less time or monetise your passions and hobbies.

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