But I Have Unpredictable Income
Are you in a profession where you don’t earn a steady paycheck every month? As a result of your special circumstances, do you think it’s impossible to live within a budget? We do ourselves and our families a grave disservice when we think having unpredictable income means that the rules that apply to those with steady income don’t apply to us.
It is a dangerous mistake to live in the future and spend money you have not yet received. Although it doesn’t sound fun in the short term, we suggest you determine the lowest amount of money you receive in a given month and work your spending plan around that amount. Of course, there may be some months that you don’t earn any income, so be reasonable but budget as conservatively as you can. It may mean that on a daily basis you miss out on some of the perks you currently enjoy in the feast months, but conversely, the famine months won’t hurt as much (if at all).
You might enjoy living life on the edge, but the stress of not being able to pay your bills in the lean months is what wrecks marriages, increases household tension, shortens tempers, and can damage relationships with your children because you are impatient and anxious.
My husband and I spent years living in the future waiting for the next big check to come along. As a partner in an entrepreneurial venture, we had the potential for big windfalls. Unfortunately, the potential wasn’t realized as frequently as we had hoped, so we ended up trying to maintain a lifestyle that was beyond our income level.
Because we “knew” that eventually we could afford it, we bought a house and car that consumed our income and left us with little to live on each month. We fooled ourselves into thinking that when extra cash rolled in, we’d finally be able to save some money and it would stretch far enough to pay for all the things we put on the back burner. In reality, we splurged a bit by eating out frequently and treating ourselves to things we couldn’t afford during our lean months. Life was a stressful roller coaster and we never got ahead of our spending.
Perhaps a bonus check comes along or you close a big deal. Rather than blowing that extra income, set it aside for the unexpected expenses that invariably occur and then to pay off debt. If you’re fortunate not to have debt, this money should be used to build a larger emergency fund (3-6 months of expenses) to serve as a security blanket in the event you are injured, lose your job, or for some reason are unable to work.
It’s easy to feel “entitled” to have nice things. After all, you work very hard for your money. It’s easy to get caught up by peer pressure to wear the latest fashions or have the coolest toys. After creating a spending plan based on the lowest month of income, you may discover that you need to do some downsizing. While it may feel overwhelmingly scary at first, I promise you that no one ever died from living within their means. You may need to evaluate what is creating the fear. Will people think less of you because you’re not driving around in a fancy car with all the bells and whistles? Why does it matter?
Learn a lesson from this updated version of Aesop’s famous fable about the ant and the grasshopper:
The ant works hard in the summer heat all season long, building his house and setting aside supplies for the barren winter. The grasshopper thinks he's a fool and laughs and dances and frolics the summer away. When winter arrives, the ant is warm, well fed, and content. The grasshopper has no food or shelter with only two choices: to die out in the cold or to beg and to be at the mercy of the ant he teased.
Stockpiling your extra cash may not sound glamorous, but neither is living today on tomorrow’s income and paying for food that you’ve eaten two years ago or purchases that have long since found their way into the trash.
Having cash reserves opens you up to innumerable opportunities: you can switch careers or jobs if you wish, you can take time to be with that new baby of yours, and you can travel to visit that sick friend or parent without worry. Peace of mind is priceless. Take that MasterCard!