How to Get By Without a Steady Source of Income

When you’re not working a steady part or full-time job, it can affect your finances in different ways. You might earn a large income from freelance, seasonal, commission, or contract work all at one time, then spend months looking for another opportunity. Because of this, keeping up with monthly bills while attempting to save for not only an emergency fund but your financial future, in general, can be a trying task. Whatever the type of work you might be involved with, living without a steady source of income takes some careful planning and budgeting to prepare for the periods of little-to-no income. The Rebound Finance Team has a few tips below so that you can create a budget that suits your lifestyle, despite your inconsistent income.

Keep a Record of Your Income

The first step you should take is to keep a record of all your paychecks, invoices, or pay-stubs from however many jobs you work. This way you’ll be able to calculate how much you make on a monthly/yearly basis. Then you can:

Monitor your income over the months to come. You’ll be able to get an estimate of your average monthly income, then start creating a budget.
Subtract 10-15% of that average monthly income, then see if it’s possible for you to live without that extra money.
Try to get an idea of the times when you won’t be making as much, allowing you to prepare yourself for the financial repercussions of those months.

Deal With Your Other Bills Beforehand

Whatever income you do earn, it’s best to use it to pay off your monthly bills right away, as soon as you’re paid. Afterwards, you’ll be able to see what remains, then dedicate it to your other necessary expenses or to your savings account.

Consider opening two separate savings accounts. The first will be your designated “income” account, the second will be your “living expenses” account.
Deposit your paychecks into the “income” account.
Calculate your exact monthly expenses, then draw funds from your income account and put them into your “living expenses” account as needed.
Then, use the money in your living expenses account to pay for your necessaries (bills, rent, food etc.)
The leftover money can then be used during the less-income months or savings (if possible).

Calculate the Inconsistent/Unexpected Costs

While your primary budget should consist of the necessary expenses, such as, groceries, housing costs/rent, transportation-related costs, utilities and paying your other monthly bills. Once this is ready, you can start on a secondary budget which will be dedicated to the inconsistent or unexpected costs.

Consider seasonal/annual or irregular expenses (yearly bills, gifts, clothing/consumer goods, entertainment/activities). Your secondary budget should now be used as a yearly budget.
Once this is done, calculate your future expenses based on how much you’ll have to both spend and save during a low-income month.

Dedicate Your Regular Income to Your General Expenses

Consider which sources of income are the most frequent ones. You should dedicate those more regular sources to all your important and necessary expenses. Relying too much on an inconsistent source of income as a way to pay off say, your rent, is just asking for financial trouble down the line. You can then use your other, less frequent incomes for other costs that aren’t as important, such as consumer goods, leisure, and vacation time.

Just remember, the vital expenses like your rent/mortgage, food/household items, and bill repayment should come first. So, if you really need to use some of the earnings from your irregular income sources to pay these costs, do so.

Hope for the Best, but be Prepared for the Worst

Whether you’re making a steady income or not, it’s important to remember that situations can happen that are simply out of your control. These financial emergencies can be a huge drain on your finances. Consider the following:

Income tax deductions. When you aren’t making a consistent income, it means a portion of your earnings is not going to the federal government for tax purposes, like you would see on a regular company paycheck. In this case, you could be responsible for paying your income tax deductions for any earnings more than $400. So, it’s very important that you save part of your inconsistent income that you can dedicate to your deduction at the start of tax season every year.
Setting up a “rainy-day” fund. This is something that everyone should do whenever possible. Financial emergencies can be hard on anyone, even those that currently have a regular income. A large expense that you didn’t predict could cause you a sizeable debt. This can be especially hard to deal with if you don’t earn a steady income, so an emergency fund is key.

Spend and Save Wisely

If you aren’t currently earning a steady income, don’t worry, it is possible to get by and still have a solid financial future. What you need to do is calculate all your general expenses, then spend and save your money wisely. In fact, living without a regular income is a good way to learn how to budget properly and not fall into unhealthy spending habits.