How to make Budget during an Unstable Income – It’s easy to create a Budget when there’s a definite income source. The Certainty associated with it is peak. One can pile up needs and somewhat be sure of meeting them.
But somehow, the story changes when there’s no stable income. It becomes difficult as Income is Unpredictable; one can’t exactly tell how much will be coming in weekly or monthly.
It is for this reason, many people believe that one with an unstable income does not require an organised budget because of the unpredictability attached.
This may be considered true, but a Budget remains an essential tool in ensuring proper financial management regardless of the nature of the income.
Making planned decisions about your income and having a budget, to a large extent, enhances financial accountability.
Can a variation in income pose a challenge in Budgeting? Yes, obviously.
But there are a few techniques that can help achieve this stride.
Key Factors on How to make Budget during an Unstable Income
- Keep Track of Income
As much as the Income is unstable, there is a need to keep close tabs on your income. Have a good record of your Cash inflow. Money from Family, Friends, Menial Jobs, Games etc.
Have a sound knowledge of your income. As a full-time, part-time or commission-based earner, you need to have a grasp of how much you earn over a given period of time. This will help to regulate Budget planning and assist in the allocation of funds for needs.
- Set Realistic Financial goals
A Vital component of budgeting is the Setting of Financial goals. Financial goals reveal what you intend to achieve with your income.
They can be categorized into three groups which are:
- Short term goal
This can span for/within a one year period.
- Midterm goals
This can can be between one to two years.
- Long term goals
This can be from two years and more.
Having identified your goals, it becomes pretty easy to keep track of your progress towards achieving them. When budgeting on an unstable income, financial goals will help you utilize your finances effectively.
Short term goals can be reviewed regularly and achieved as finances flow in at different times while savings can be done for the achievement of long term goals.
- Prioritise Needs
As your Financial goals are been written down, take out time to weigh their necessity or needfulness.
Some fixed essential expenses like rent can fall under mid-term goals while some variable expenses like feeding, clothing, transportation, and others which are also essential can be written down as short term goals.
Whether fixed or variable, these essential expenses are necessities that should be prioritised when making a budget.
Your Budget should accommodate only what’s of Priority and necessity.
- Diversify your earnings
A little here, a little there, when collected together, they can make a greater whole.
Little by little, a little becomes a lot.
Having diverse streams of income can lessen the pressure of meeting certain financial plans and this makes budgeting more achievable.
Living on an unstable income has its moment of ups and downs. There are alteenating periods of high income and low income as well.
Diversifying your earnings will help to make up for those periods of low income. These diverse streams of income can either be budgeted for separately or collectively.
- Incorporate spending and saving plans
Having a Savings plan properly incorporated in the budget is a good way to meet some needs that might pop up or some needs that may take a long period of time to be met.
One might be wondering how possible it is to save up with an income that cannot be predicted. Well, this is where making plans with an estimate comes in.
Look over the previous months, make an estimate of what should be coming in next and allocate it into savings and spending plan. This estimate can be modified as time goes on based on the flow of income but your budget should treat your saving as important as your expenses.
Saving is also priority.
Budgeting with an unstable income might not be an easy stride, but it is an essential step that needs to be imbibed if anyone desires effective financial management and accountability.