Change in Income and Debt
In today's world, income fluctuations are a common challenge that many people face while attempting to establish a budget. This occurs when your income varies greatly from month to month, such as when you are self employed in sales occupations or seasonal industries. This presents a unique challenge in creating and managing a budget. Many people fall into the trap of spending excess money on the good months and then resorting to credit on the slow months. The problem with this method is that often times the credit is not paid off when the funds are available. Each down month results in a higher accumulation of debt as individuals fall into a vicious financial cycle.
Here are some ideas for budgeting when you have irregular Incomes. Write down a list of all of your annual expenses such as those that occur monthly, as well as those that might occur at odd intervals. Make sure to allocate money for non reoccurring expenses such as Christmas gifts, vacations and savings. Then divide the total amount of expenses by twelve months. This will give you a pretty good idea of how much money you will need on a monthly basis.
Save surplus money where you make more than the needed amount as you may be tempted to spend the difference. Resist that temptation and place the extra funds in a savings account. Only use the surplus funds in slow months. When you encounter a month where the incoming funds are less than the budgeted expenses, you can utilize the surplus money fund. Plan to cut expenses if necessary when it becomes obvious that your annual expenses are going to exceed your annual income.
By following these simple procedures an individual can create a simple workable budget. The next challenge is disciplining yourself to stick to your newly created financial plan. Consistently doing so can bring about amazing results, such as, lowered debts, less stress, and financial freedom.