People who do not get typical monthly wages for their work might struggle with planning their budget as it sometimes seems absolutely impossible. Indeed, when something is unstable and you do not know anything about the future, it is not obvious how you can make plans in such a situation.
In the reality, planning your budget if your income source is not regular is even more crucial than it is the case of occupations which are offering workers with stable monthly income. This article will give you some necessary information on the topic.
What is an unstable source of income?
Many people have an idea of an unstable source of income as of not having one occupation and doing various sorts of work whenever there is such an opportunity. Indeed, this can be called an unstable source of income, however, the list of possible situations when a person does not have regular payments is pretty extended.
For example, even people who have a fixed salary can still be the ones with unstable income in case the great fraction of the income is based on the percentage of the generated profits of a company. This is a very typical form of payment in case of various occupations where people are selling goods or services to the clients of a company. You can easily imagine there can be serious fluctuations in the income in such a situation.
There are also other forms of payments. Some individuals are working on pretty large projects. Before they start, they get a small amount of money as a prepayment and the rest of the sum which might be pretty large, is received after a project is finished. You can certainly imagine how challenging it might be for a person to spread this income for a couple of months.
Finally, the form of work chosen by freelancers is also pretty unpredictable. These individuals can have a number of clients but in many cases, the exact numbers differ from month to month, so it is not an easy task to tell for a fact what will be the income of such a person the next month.
Why should people with unstable income plan their budget?
No matter how tricky it might seem, planning the budget is especially crucial exactly because the income is unstable. Of course, when one knows exactly on which amount of money he or she can count the next month and on the exact dates when this money will come, the planning process does not cause any trouble. This is not the same for people who can only make some rough estimation about their financial condition in the foreseeable future.
It is crucial to understand that planning of budget is not necessarily about saving money for some particular purpose such as for instance, an expensive purchase. Money management has another crucial function which is setting some limits on the average amount of money you are going to spend within a particular amount of time and also, dividing it in a sensible way among the categories of expenses you have. This is done in order to make it possible for you to live in a convenient way all the time and avoid situations in which you have to borrow money in order to be able to live through the last week before your next payment.
Certainly, when one does not have a stable source of income, this task becomes even more crucial as it is more easier for such individuals to reach the end of the month without any money at all. For such people, it will be especially helpful to plan their finances not just for the next month but for a longer time, for example a year or at least half a year.
As you can imagine, this process will require a lot of discipline from you, however, this will be very rewarding as you will be able to protect your financial independency and make the most of the profits you are getting.
Obviously. If you don’t know if you’re going to get paid next month, you need to budget and count your money.