Not every person in this world likes to have a day job where they would be stuck in their cubicles from 10 am to 6 pm. The way of earning a livelihood may vary from person to person. Some persons value the sense of security while others like to do freelancing or be self-employed as their outlook on life is different than the office employees. The only challenge that has to be faced by those kinds of people is the irregular income. When you earn money in irregular intervals, you need to know the art of managing your personal finance well.
Managing money without a regular income seems to be tricky and it is true to some extent. When your income comes in irregular intervals, most of the times you are uncertain about the time or amount of money which is about to come. In such scenarios, one must be careful about his finances so that they don’t need to face the shortage of liquid fund.
Smart Moves to Manage Your Money Efficiently
Make a Budget
Making a budget and following it strictly is the first thing that has to be done when you are determined to manage your money well. When you have an irregular income, it becomes difficult to make a budget. Sometimes your income may increase and sometimes it may decrease. In such situations, it is best to make a budget considering the lowest income of yours. If you make a budget in this way and can stick to it, you will be able to build up a handsome savings corpus or a good amount of investment in the months when you will earn more than your budget. Whenever you will earn more than the minimum income, the extra amount can be the surplus amount.
Buy Life and Health Insurance
Though sometimes day jobs seem to make people chained, there are many advantages too. One of the prominent advantages of a day job is the life and health insurance provided by the employer. So when you are a freelancer or a self-employed, you miss such benefits. Having life and health insurance is a must for every individual who has the responsibilities of their family. One must buy a term insurance plan that protects the policyholder for a fixed period of time which is called the tenure of the policy. If the policyholder dies within this period, the nominee of the policyholder will receive the death benefit as well as the sum assured. The amount can be used for paying off any kind of loans such as the home loan or car loan. In this way, you can keep your family safe from the being debt-burdened at your demise.
Keep an Emergency Fund
The emergency fund is a must-have when your income is irregular. Such funds will become a lifesaver if your payment delays. While being a freelancer or a self-employed, you can never be certain about the interval of the cash flow. Sometime the cash flow can happen early while some other days it may be delayed. To fight with such kind of odds, you are to be equipped with the emergency fund at all the times. The emergency fund will be helpful in unforeseen situations like a medical emergency, urgent travel etc.
On several occasions, the persons with irregular income spend a lot of money when the money comes. The habit of excessive spending should be brought into control. The unplanned expenditure done when there is money in abundance may result in the cash crunch at the later period. One has to be calculative on spending from the day one of the arrivals of funds. Spending money aggressively may make you compromise on necessities in days to come.
When you are on irregular income, credits are a big no for you. A credit of any kind except a credit card is subject to make repayments at a regular interval and most of the times on a monthly basis. Whenever you avail any kind of loans such as a personal loan or home loan, you are to make an agreement with the lender on the EMI date. The EMI amount auto debits from the borrower’s bank account on a particular date of every month. If your income is not regular, you may not keep the sufficient amount in the bank account on the EMI date which will make your loan EMI get bounced. Such situations can create a negative impression of yours and getting credit in the future will be more challenging for you.
Going through the phase of life when income is not regular is a common situation for most of us. In such situations managing your personal finance is all about living within your means. Disciplined financial habit is the key to enjoy a smooth financial life even when the income is irregular.