Month: September 2020

  • How to Pay Off Debt Faster with a Balance Transfer

    When my ex-husband and I got divorced, I found myself completely starting over financially. I didn’t have anything in savings, and I had to rely on credit cards to get my fresh start.

    When I signed up for my credit card, I got a promotional offer of one year with 0% interest. I was so sure I’d be able to pay it off in time.

    Fast forward twelve months, and I was still carrying a balance. And when I saw what my monthly interest charge was, I was horrified. I knew right away I had to figure out an alternative solution.

    That’s where balance transfers come in. After doing some research, I decided that applying for a balance transfer card would be the best way to aggressively pay down my debt without losing money to interest.

    One of the most common questions I get from readers is whether a balance transfer is a good option to help pay off debt faster.

    Considering most American households are carrying some sort of credit card debt, it’s not really a surprise that I get this question often.

    In this article, I’m sharing what a balance transfer is, how it can impact your finances, and how to decide if it’s the right choice for you.


    How to Pay Off Debt Faster with a Balance Transfer

    There are affiliate links in this post, meaning I may make a small commission at no additional cost to you. For more information, see my full disclosure policy here.


    How does a balance transfer work?

    A balance transfer is when you transfer the balance of an existing credit card to a new credit card. In other words, you’re using a credit card to pay off your credit card debt.

    The reason these transactions are so popular is that many credit card companies offer a 0% promotional period on new balance transfers. 

    Let’s say you’ve got $5,000 in credit card debt with an interest rate upwards of 20%. By using a balance transfer, you can move that $5,000 to a new credit card and pay 0% interest for the first 12-18 months.

    This move can save you money in interest, and help you to pay off your credit card debt faster than you otherwise would have.


    Is it a good idea to do a balance transfer?

    Balance transfers can be an amazing tool for anyone working to pay down credit card debt. Here are a few perks:

    • Save money on interest. 0% credit card interest can save you SO much money. Let’s say you have $2,500 of credit card debt with 24% interest (not at all uncommon these days). If you pay your card off in 12 months, you’ll pay over $300 in interest. If you do a balance transfer and pay 0% interest, you’ll save yourself hundreds of dollars.
    • Pay off your debt faster. One of the reasons credit card debt is so hard to pay off is that a huge chunk of your monthly payments go toward interest. You’re often barely making a dent in your balance. By getting rid of interest for a while, all of your money goes toward the principal and you’ll pay off your debt WAY faster.


    Is there a downside to balance transfers?

    Balance transfers can be a great way to buy yourself some time while you pay off your credit card debt. But there are some downsides to consider as well.

    • Expect to pay some fees with your balance transfer. It’ll vary depending on the card you choose, but the fees are typically 3-5% of the total balance you’re transferring. Usually, this small fee is worth it, but it’s best to run the numbers for your specific situation.
    • Balance transfer offers aren’t available to everyone. Cards with 0% balance transfers are primarily available to those with good or excellent credit. The best offers will be reserved for those with excellent credit.
    • If you haven’t addressed the issues that caused you to go into credit card debt in the first place, I wouldn’t recommend a balance transfer. You may find yourself going into even more debt as a result of the extra credit available to you.


    Do balance transfers affect your credit score?

    Balance transfers can definitely impact your credit score, but it’s difficult to say what the effect will be for any one person. 

    First, applying for a credit card places a hard inquiry on your credit report. This can result in a slight drop in your score.

    Next, opening a new credit card will shorten your average length of credit. The longer your credit history the better. So lowering your average may cause your score to drop.

    Finally, opening a new credit card will increase the total amount of credit available to you. As long as you don’t rack up more credit card debt, your credit utilization (aka the percentage of your total credit you’re using) will go down. As a result, your credit score can increase.

    Keep in mind that if you struggle with impulse spending, especially when it comes to credit cards, then opening a new card can seriously hurt your credit in the long run. Only open a card if you feel confident you won’t take on more debt.


    How to do a balance transfer

    Ready to start the balance transfer process and pay off your credit card debt faster? Here are the steps to follow:

    1. Check your credit. 0% balance transfer cards are reserved for people with good or excellent credit. You may not want to apply and have a hard inquiry in your credit report if you won’t qualify.
    2. Choose the right card for you. There are plenty of balance transfer cards on the market, and each one comes with its own perks. Do some research and decide which card best fits your needs.
    3. Decide how much to transfer. Once you’re approved for your balance transfer, it’s time to decide how much to transfer. It’ll depend heavily on how much credit you’re approved for. You can’t transfer more credit than your new credit card company is willing to extend to you.
    4. Make a debt payoff plan. When it comes to balance transfer deals, it’s ALL about the follow-through. Transferring your balance to a new card is only worth it if you’re going to use this opportunity to pay down your debt. You can use a tool such as Undebt.It to help you plan your debt payoff.

    As you’re working your way through the balance transfer process, remember one very important thing: the balance transfer is not immediate. It can take anywhere from a few days to a few weeks for your transfer to go through.

    While you wait for the deal to close, you still have to make your normal monthly payments to your old credit card company. Failing to do so can have a huge negative effect on your credit score!


    The best balance transfer credit cards

    A quick Google search will help you find plenty of credit cards specifically tailored at balance transfers to help you pay off credit card debt faster. I’ve got some personal experience with balance transfer cards, so I’m sharing a few of my favorite balance transfer cards on the market:

    • Chase Freedom Unlimited: This is hands-down my favorite all-purpose credit card. It comes with higher cash back than you’ll find on many other cards, along with extra rewards on bonus categories. Plus, it offers 0% for 15 months on balance transfers.
    • Capital One Quicksilver: This was my very first credit card, and it’s one I still have in my wallet. In addition to the cash back rewards it offers, you’ll get 0% for 15 months on all balance transfers.
    • Discover It Cash Back: This card is another one I’ve had for years, and it offers elevated cash back on certain bonus categories. Plus, you’ll get 0% for 14 months on all balance transfers.


    Final Thoughts

    Credit card debt is a huge struggle for so many Americans today. Often we open a credit card with the best of intentions, but impulse spending or a financial emergency causes us to go into credit card debt.

    The good news is that a balance transfer can be an amazing tool to help you pay off your debt faster without wasting a ton of money on interest.

  • 9 Steps to Help You Get Back on Track With Your Finances

    Despite our best intentions, we all inevitably seem to go through financial setbacks that catch us off-guard and throw off our financial progress.

    Mine came in 2017 when my ex-husband and I decided to end our marriage. Between the discrepancy in our incomes (I made way less than he did), the costs associated with the divorce, and my lack of financial safety net, it was a struggle for a while.

    Once I finally got back on my feet and started to regain some balance in my life, I had to get my finances back on track.

    I’m not going to lie – it was an uphill battle. There was a lot of work that went into figuring out where my finances were, making a plan to get them back on track, and actually following through on it. 

    Throughout the pandemic, plenty of people have gone through financial setbacks of their own. Whether you were laid off from a job or just let your spending get away from you, it’s time to get a plan in place to get back on course. 

    In this post, you’ll learn the nine steps to follow to get you get back on track with your finances and lessen the blow of future financial setbacks.


    9 Steps to Help You Get Back on Track With Your Finances


    Evaluate your current financial situation

    The first thing you have to do to get back on track financially is to figure out where you are now. As with any journey, you have to know where you’re starting to map out the route to your final destination. 

    As you’re evaluating your financial situation, determine the following:

    • Your current income and expenses
    • Your net worth
    • How much money you have in savings
    • How much debt you owe
    • Any outstanding bills


    Figure out where you went off course

    Once you figure out where you’re at with your finances, determine how you got there. Really narrow down what caused you to get off-track with your finances.

    In some cases, it wasn’t anything you did. Cases of unemployment, especially during COVID, were unavoidable. It wasn’t a scenario any of us ever expected, and as a result, most of us weren’t financially prepared.

    But in other cases, you might look back and realize your own actions caused you to get off course with your finances. For example, maybe you stopped tracking your spending a few months ago or took on a debt you couldn’t really afford. 

    Identifying the root cause of the problem can help you to avoid getting off-track for the same reason again. 


    Create a new budget from scratch

    I’m constantly tweaking my budget to make sure it’s still working for where I’m currently at in life. But some circumstances call for a full overhaul.

    Anytime I’m going through a major life change or find that I’ve gotten completely off-track with my finances, I like to start fresh with a brand new budget. 

    Think of it like Marie Kondo-ing your budget. Instead of going through your existing budget and deciding what stays, throw everything out and only put back those things that really belong there.

    Starting fresh with a new budget is especially helpful if your income or expenses have changed at all since the last time you put together your budget. 

    Read More: How to Create a Monthly Budget That Really Works


    Start with any outstanding bills

    Before you dive into any new financial goals, make sure you’re up-to-date on any outstanding bills you have. When you go through a time of unemployment or another financial struggle, you may end up falling behind on one or more of your expenses.

    Once you start getting things back in order, settling up any outstanding bills should be the first thing on your to-do list. 


    Create a long-term plan for debt and financial goals

    One of the most valuable lessons I learned on my own financial journey is the importance of having a plan in place. And when it comes to your finances, there are two plans you absolutely have to have.

    First, make sure you have a plan in place to pay off your debt. Ideally, you’d be able to make extra payments to pay your debt off ahead of schedule. But even if you can only swing the minimum payments right now, knowing when you can expect to be debt-free is critical. 

    The other plan you should have in place is one for your financial goals. How many times have you found yourself dreaming of a future home or a dream vacation but never actually taking steps to get there?

    When you don’t have a plan in place, you’re far less likely to take action. By creating a written plan, you’re exponentially increasing the odds of actually reaching your goals!


    Track your spending

    I always think tracking your spending is important to financial success. But when you’re working on getting your finances back on track, this becomes even more important.

    Tracking your spending allows you to know exactly where each dollar is going. This ensures you’re being super intentional about your spending. Doing so can also avoid being caught off-guard when an unexpected bill hits or you go over budget without realizing it. 

    There are plenty of budgeting apps that can help you to track your spending. I also recommend a good old-fashioned spreadsheet, as it forces you to personally check in with your finances on a regular basis. 


    Look for ways to increase your income

    In many cases, we realize that our financial troubles stem from the fact that our current income isn’t sufficient to help us pay our monthly bills and reach all of our financial goals. In that case, you might consider looking for ways to increase your income.

    There are a few different ways you can go about making more money:

    1. Negotiate a pay increase: Perhaps the simplest way to increase your income is to negotiate a salary increase at your current job. This strategy allows you to make more money without taking on a second job.
    2. Get a part-time job: If negotiating a raise isn’t in the cards, you might consider a part-time job. When Brandon and I were paying off debt and saving for our RV, he worked a few nights per week at a bar in town to bring in some extra money. Meanwhile, I worked on my freelance writing business while working at my government job.
    3. Join the gig economy: If working specific hours at a part-time job doesn’t work with your schedule, you can join the gig economy. Options include rideshare apps such as Uber, grocery delivery apps such as Instacart, or pet-sitting and dog-walking opportunities through a service like Rover. These opportunities allow you to pick up jobs only when you’ve got some time available.
    4. Start a business: If you want more of a long-game solution to increase your income, you might consider starting a business. Know that this option usually won’t result in making money right away. In fact, you’ll probably have to put in a lot of work before you’re profitable. But in the long run, this option can result in the most amount of money. The good news is that technology makes it fairly easy and extremely low-cost for anyone to start a business!


    Put a safety net in place

    Once you start getting back on track financially, it’s time to put a safety net in place for the next time things don’t go as planned. 

    There are two key strategies to help you avoid or lessen financial struggles in the future:

    • Emergency fund: Your emergency fund is a pool of money that can help you with a one-time financial emergency, such as home or car repairs. Even more importantly, your emergency fund serves as an income replacement in case you lose your jobs. In 2020, COVID caused people to be laid off from work for far longer than anyone would have expected. This taught us all the importance of an emergency fund that can cover your bills for several months. 
    • Sinking funds: While your emergency fund helps you cover any unexpected financial emergencies, sinking funds help you to plan for expected but irregular financial obligations. With sinking funds, you set aside money each month for an expense that comes around less often. For example, let’s say you spend $600 on Christmas each year. Instead of taking $500 out of your December budget, you’d set aside $50 per month all year. Sinking funds can also be used for costs such as:
      • Car insurance
      • Home and vehicle repairs
      • Property taxes
      • Holidays
      • Annual subscriptions
      • Financial goals


    Have regular money dates

    If you share finances with a partner, or even if you share a life with a partner without having joint finances, communication around money is key.

    Regardless of whether you’re just coming back from a financial setback, money dates are critical to making sure you and your partner are on the same page and that you both have a seat at the table. 

    These check-ins become even more important when you’re working on getting back on track after a setback.


    Final Thoughts

    No one expects financial setbacks to come, but they inevitably seem to pop up once in a while. By following these steps, not only can you get your finances back on track, but you can also prevent future setbacks from being quite as painful.

  • How to Start a Side Hustle and Make More Money

    One of the most important lessons I’ve learned through my own money journey is that the best way to reach any financial goal faster is to increase your income.

    Wanna pay off debt? Increase your income, and you’ll pay it off faster.

    Wanna save up to buy a house? Increase your income, and you’ll get your house faster.

    It’s just basic math – the more money you have, the more you can do with it. And one of the best ways to increase your income is to pick up a side hustle.

    I started my side-hustling journey in 2014. I had a full-time government job, but the pay wasn’t great, and it didn’t do a lot to spark my creativity. So I started my first blog, both as a creative outlet and as a great way to earn a bit of extra income.

    In the years since then, side-hustling has helped me to pay off tens of thousands of dollars in debt and save up enough money to buy an RV, and travel the country full-time. Not only that, but I was able to turn my side gig into my full-time, allowing me to work from anywhere on my travels.

    In this post, I’ll share all of my best tips for starting a side hustle and making extra money to help you reach your financial goals.

    Not sure a side hustle is for you? Read this article on why a side hustle is a great idea!


    There are affiliate links in this post, meaning I may make a small commission at no additional cost to you. For more information, see my full disclosure policy here.


    Step 1: Choose a side hustle idea

    Some of you might already have a side hustle or business idea that you can’t wait to dive into. For others, maybe you know you want to start a side gig to earn a bit of extra money in your spare time, but you’re not sure what exactly you want to do. Well, that’s what this first step is for. This phase is all about brainstorming!

    First things first, ask yourself what you are good at and passionate about. It’s important that this isn’t something you’re going to get sick of right away! I could talk about my personal finance for hours on end, which made writing about money the perfect side hustle for me.

    In addition to finding a topic that you’re passionate about, you have to make sure it’s something that other people are interested in as well. Because as important as it is that YOU love your side hustle, you can’t make money from something that no one else will spend money on.

    Still short on side hustle ideas? I’ve got you covered! In this blog post on reasons to start a side hustle, I shared 9 awesome side hustle ideas! Those ideas include:

    • Becoming a freelancer (writer, graphic designer, etc.)
    • Starting a blog
    • Opening an online shop
    • Becoming a virtual assistant
    • Selling digital products, such as an ebook or an online course
    • Teaching a skill 
    • Joining the gig economy


    Step 2: Do your research

    Let me preface this by saying that when I started my side hustle, I did zero research. I literally didn’t even know that blogging was a thing you could make money from when I first got started. And I certainly didn’t forsee being able to turn it into a six-figure freelance writing business

    But once I learned that it was something you could make an income from, you better believe I did a ton of research to maximize its potential.

    Whether the side business you’re starting is a blog or something totally different, I guarantee there is tons of information available online from people who have done the same thing you are trying to do. Side hustles are quite common today, and I guarantee someone else is teaching people to do exactly what you’re trying to do.

    Research everything from the logistics of setting up your website to marketing. Join some Facebook groups with others with the same side gig and learn from them. One thing I’ve learned is that online business owners seem super happy to share their knowledge and create connections with other online business owners. It’s such an awesome and welcoming community.


    Step 3: Get it up and running

    Okay, so you’ve figured out the what and the how. Now it’s time to just freaking do it already. The launching phase is going to vary from person to person. Part of this depends on the side hustle you’ve chosen – some just take longer to get set up than others do!

    It also partly depends on what else you’ve got going on in your life. The more prior commitments you have, the less free time you’ll have to work on your side gig. And if that’s the case, it’s going to take a bit longer to get set up.

    I remember when I was just in the launch phase of my website, I seriously looked for every spare moment I could find to work on it. I spent entire weekends curled up on the couch with my laptop, excitedly planning and designing everything. Additionally, I spent lots of nights up way too late because I was mid-project and just couldn’t bring myself to stop.

    Then again, I’ve also gone through seasons of life where I don’t have nearly as much spare time. I would have had a much more difficult time starting my side hustle during those seasons.

    Pro tip: Knowing how much time you can devote to your side hustle can also help you decide the best side hustle for you. Some naturally require more time than others.

    If you’re like me and have chosen a blog as a side hustle, the launch phase is going to include things like setting up your website and choosing a design, getting your social media accounts set up, learning SEO, and getting your first few blog posts written.

    Of course, the start-up process will look entirely different if your side hustle is something else.


    Step 4: Create a schedule

    If you truly want this side hustle to make money, then you have to treat it like a business. That means setting aside certain hours when you are going to work on your business.

    Obviously, since it’s your own business, no one can enforce these hours for you. There will definitely be times when something else sounds more fun than working.

    But just remember, you will only get out of it as much as you put into it. How many hours you work is 100% up to you. Someone with a full-time job and a family with kids at home is going to have fewer hours available than someone who is single with no kids.

    Since this is a side gig, your work hours are certainly going to be limited. You might have a full-time job, be a stay-at-home parent, or be going to school full-time. You know best when you are free and will be most available to work on your business.

    When I was still working my day job, evenings and weekends were my side hustle time. I scheduled certain work hours into my calendar, and those hours are non-negotiable. And if I knew I’d be busy all weekend, I’d make sure to work extra hours in the evenings that week.

    Part of creating your side hustle schedule is respecting everyone’s time. You need to respect your own time and hold yourself accountable for those hours you plan to work on your side hustle.

    But this also means respecting your employer’s time if you work a full-time job. Don’t let your side hustle interfere with your job. If you have a lunch hour or breaks available to get in a little work on your side hustle, that’s great!

    But don’t work on your side hustle when you should be working on your full-time job. If you do, you may not have a full-time job for long.


    Step 5: Set SMARTER goals

    Even though you spent a TON of time doing research before launching your side hustle, there’s still so much to learn.

    You’re going to learn a ton right after you launch your side hustle and really dive into working on it every day. Once you have a better idea of what you’re getting yourself into, it’s time to set some goals for yourself.

    I set zero goals for myself when I first started my blog. And guess how long it took me to make my first dollar. One year. I’m guessing you’re not interested in waiting that long! Part of this is because I started off just blogging as a hobby, and part of it was that I didn’t get organized and set goals for myself.

    So what kind of goals should you be setting? This isn’t just about throwing out arbitrary goals. It’s about setting realistic goals and coming up with a plan to meet them. In other words, you want to set SMARTER goals. And just what are SMARTER goals?

    • Specific: The more specific your goals, the better. Don’t just set a goal of earning money with your side hustle. Set a goal of earning $1,000/month from your side hustle within the first year. (That’s just an example, the actual number will vary person to person).
    • Measurable: The progress of this goal can be easily tracked. $1,000/month is very specific – you’ll know for sure if you’ve reached it or not! And once you know how much you want to make per month, you know what your daily and weekly goals should be!
    • Attainable: While setting your goals high is awesome, make sure it’s something you can actually accomplish. Consider what will be required of you to complete this goal, and carefully consider whether you have that to give.
    • Relevant: Make sure your goal is in harmony with your core values and what you’re working toward in life. If your ultimate dream is to work from home full-time, then setting a goal of $1,000/month in the first year is awesome because you’re totally moving in the right direction!
    • Time-Bound: Don’t make the time frame for reaching your goals open-ended. We tend to take as long to accomplish a task as we are allowed. If your goals are completely open-ended, they may never seem urgent enough to get to. As you can see, we set a time frame of one year in the goal we’re using as an example.
    • Exciting: Let’s be real, it’s going to be a lot easier to make time to work on goals that excite and inspire you. Emotions are a big factor when it comes to goal-setting, and you’re far more likely to reach for things that excite you.
    • Routine Bound: I firmly believe that creating routines and habits is the absolute best way to make changes in your life. Incorporating your goal into your daily routine ensures you’re making time for it. It also gives you a much better chance of reaching it. For example, you might say that every evening you get home from work at 6 pm and work on your online business until 8 pm. It becomes a daily routine and ensures you’re putting in the time to reach that $1,000/month goal.


    Step 5: Invest in growth

    If you truly want your side hustle to be a real business that creates an income stream, then you have to treat it like a business. And this means investing in your growth.

    Time is certainly the biggest investment you’ll make in your side hustle. But there will be some financial investment as well. The good news is that many side hustles are relatively cheap to start. And you can increase your investment as you start making an income.

    Some of the investments you’ll make in your side hustle will be tools, such as those to start your email list or market yourself on social media.

    Here are a few of my favorite tools that I use to run my business:

    • SiteGround: This is the website hosting company I use – monthly plans start at $3.95/month, so SUPER affordable for beginners.
    • Canva: Images are an important part of any website. I use Canva to design certain elements of my website. I also use it to design the images that appear on my website and social media pages.
    • Flodesk: For many side hustles, having an email list is going to be crucial. Flodesk is the best!
    • QuickBooks: This is the tool I use to manage my business finances. You’ll need to do so no matter what side hustle route you choose to go.


    Step 7: Track and evaluate your progress

    You may think that once you make it through the research phase and launch your side hustle, it’s all smooth sailing toward your goals. I assure you this is not the case.

    There are going to be bumps in the road. One month you’ll have an amazing month and feel like you’re making a ton of progress. But the next month, you’ll feel like you’re starting from square one.

    And one thing I can definitely promise you: you will never, ever stop learning when it comes to best practices for your side hustle.

    Because of this, it’s super important that you’re diligent about tracking and evaluating your progress. Make sure to have some sort of system in place where you can track how things are going. 

    The metrics that are important to you will, of course, depend on the side hustle you choose. However, I’d caution you against getting too caught up in vanity metrics, such as the number of followers you have on social media.

    In addition to tracking everything, you need to be regularly evaluating those numbers to decide if what you’re doing is really working.

    If you see a trend of several months where you’re income is going down, it’s probably time to change something up. It’s when you get complacent that things start to really slip.


    Step 8: Make a plan for your side hustle income

    I love that having a side hustle can help people to pay off debt and reach financial goals years earlier than they otherwise would have. But in order to really make the most of it, you’ve gotta make a plan for that money.

    Imagine this: You start a side hustle to help you pay off your student loans faster. You get it set up and start bringing in money. You’re so excited about this new income that you find yourself doing a lot more online shopping than planned. Suddenly the money is gone, and you haven’t put any extra toward debt.

    Listen, I’m all for spending money on things that bring you joy. In fact, it’s one of the things I teach in my money coaching program. But I also teach my clients to be incredibly intentional about their spending and to have a plan in place.

    Instead of letting your emotions guide your spending decisions, make a plan ahead of time. For example, maybe you decide you’ll spend 75% of your side hustle income on extra debt payments while the other 25% will be fun money. You still get to treat yourself, while also making progress on your goals.


    Step 9: Know the tax laws regarding side hustle income

    One thing to keep in mind about starting a side hustle is that there are tax laws you’ll have to follow.

    When you have a full-time job, your employer takes money out of each paycheck to pay income taxes on your behalf. But with a side hustle, there’s no one doing that for you.

    But the IRS still expects to get paid. It’s critical that when you’re making money on the side, you track every single dollar you earn and spend. That way, you can report them for tax purposes.

    Software like QuickBooks can help you get this process started. And if you’re uneasy about handling the finances yourself, consider hiring an accountant or bookkeeper to help you out.


    Final Thoughts

    A side hustle is my absolute favorite way to increase your income. That extra income can help you to pay off debt and reach your financial goals. It can collapse the timeline of these big goals by years! And while starting a side hustle might seem overwhelming at first, it’s a lot less scary once you get started! 

  • How to Budget With an Irregular Income

    When I first started budgeting, I had a regular full-time job and knew exactly how much would be on each paycheck. I loved the sense of control that came with it. I knew exactly how much I made and how much I spent. 

    But within a few years, things looked very different. I had started freelancing, which brought in an inconsistent income. Then I met and married my current husband, who had an irregular income that relied heavily on tips.

    Not long after that, I quit my job to run my business full-time. Now my income is more irregular than ever, and there are no guarantees like there were in my government job. 

    Over the past few years, I’ve learned how much more challenging it can be to budget when you have an irregular income. 

    If you’re dealing with income that doesn’t look the same from one month to the next, I know these tips will help you too.


    How to Budget With an Irregular Income


    Determine your bare minimum budget

    The first step to budgeting with an irregular income is to figure out your bare minimum budget. In other words, how much money do you actually need to live on each month?

    This number should include necessary fixed expenses such as rent, a car payment, student loans, insurance, utilities, and groceries.

    Your bare minimum budget shouldn’t include discretionary spending, such as excessive eating out, travel, or entertainment. 

    What good is knowing this number?

    First, it’ll give you an idea as to whether you actually make enough money. If your irregular income doesn’t allow you to pay all of your bills, it’s time to figure out how to make more money (or change your spending habits). 

    Your bare minimum budget also gives you an idea of how much you should have in savings. In other words, how much do you need to have set aside in case you stop earning income? 

    Finally, your bare minimum budget tells you when (and how much) you can spend on discretionary expenses. If you have $2,000 per month in expenses and make $4,000 per month, you know you can probably afford to spend some money on fun.

    Read More: How to Create a Monthly Budget That Really Works


    Give yourself a regular paycheck

    I like the idea of taking away some of the irregularity of an inconsistent income by giving yourself a steady paycheck. 

    So how does that actually work?

    Let’s say you are a freelancer who makes anywhere between $3,000 and $6,000 per month after taxes, depending on the season. That money goes into your business checking account. Your monthly expenses are about $3,000. 

    Rather than transferring all of the money from your business checking to your personal checking each month, give yourself a monthly paycheck of $3,000. 

    By doing this, you are no longer budgeting on an irregular income. You know exactly how much will be hitting your bank accounts each month. You’re also able to start building a bit of a buffer in the months you make more than $3,000.

    If you have a variable income but don’t have a separate account for a business, open a checking or savings account to deposit your income into that is separate from the one you use to pay your bills. 

    If you aren’t sure how much to pay yourself each month, aim for your average monthly income. That way, the good months will be enough to supplement the months you make less.


    Move extra money into a savings account

    So if you’re making between $3,000 and $6,000 per month and only paying yourself $3,000 per month, you’re going to have some money left over. 

    In the months when you make more than $3,000, you can set that money aside in a separate savings account. Then, if there’s ever a month where you don’t make $3,000, you can supplement your income to still give yourself that $3,000 paycheck.

    Another nice thing about this savings strategy is that once you have enough set aside that you feel comfortable you’ll be able to cover any low-income months, you can start using that money for other things! You can put it toward debt or use it to reach your other savings goals.

    Pro tip: You can also add to this buffer with any cash windfalls you get, such as tax refunds, Christmas or birthday gifts, and other random influxes of cash.


    Live on last month’s income

    One of the best pieces of advice I can give to anyone with a fluctuating income is to live on your income from the previous month. Actually, this is great advice for anyone, regardless of if you have a regular income or not! 

    So how does this actually work?

    Most people living on the income they earn each month. So the paychecks they get in September are what they use to pay September’s bills. 

    But for someone who doesn’t know exactly how much they’ll earn this month, this type of budgeting is a bit of a gamble. After all, you may not know how much you’ll earn until the end of the month and may not have the income in time to pay for that month’s expenses.

    Instead, I like to always budget one month ahead. So the money that goes into my bank account in September doesn’t get transferred to my personal checking as my “paycheck” until the next month. 

    That way, before October hits, I know exactly how much money I have available. 


    When necessary, dip into your savings account to supplement your income

    One of the downsides of variable income is that in some months, your pay is a lot lower than in others. In the time I’ve been freelancing, I’ve learned that my income can vary drastically. 

    In a perfect world, I would make at least enough each month to cover my bare minimum budget. But just in case that doesn’t happen, I want to be prepared. During those months where your income is lower than normal, you can dip into your savings account (the one you funded with your excess income) to help pay your bills. 


    Have a large emergency fund

    Separate from your buffer account, you should also have a hefty emergency fund. 3-6 months is a good size savings account, but I think closer to 9-12 months is ideal for someone who is self-employed and has an irregular i

    That buffer account is to help pay the bills during any months when you earn less than normal. But the emergency fund is to help with any crazy expenses (like home repairs that cost thousands of dollars).

    More importantly, your emergency fund is there to replace your income in the event that you lose your job. 


    Keep ideas on-hand to increase your income

    One thing I’ve learned since becoming self-employed is that I have to be prepared to increase my income at any time. 

    I never know when I might lose a freelance client or when a client might start sending me less work. And if that happens, I have to be prepared to immediately replace that income.

    The same goes for other types of workers with irregular income. In 2020, the food service industry took a huge hit. Even as restaurants started to re-open, fewer people were going out to eat right away. This meant fewer tips for those employees.

    That’s a situation in which you might want to have some ideas in your back pocket for increasing your income when things head south quickly. 


    Use a budgeting app to stay organized

    Keeping track of your budget when you have an irregular income (or even when you don’t) can be a lot to manage. And especially when you’re just getting started, you might want to use an app to help you stay organized.

    I think You Need a Budget (YNAB) is the absolute best budgeting app, especially for those who don’t bring in a consistent income. It’s specifically designed to help you get one month ahead on your budget so that you’re using last month’s income to pay your bills. 

    I actually use YNAB for both my business and my personal budget! First, I keep a separate business budget to track my business income and expenses. Taking my own advice, I budget a month or two ahead for my business expenses and set money aside for taxes.

    Then, I pay myself a monthly paycheck, which I use to budget ahead on my bills.

    Using YNAB has gotten me so into budgeting ahead that I actually try to budget ahead two months at a time rather than one. This single habit has made the cost of YNAB more than worth it! 

    Read More: The Best Budget Apps to Help You Manage Your Money


    Final Thoughts

    Budgeting is stressful enough for most of us. And when you add on the extra layer of an irregular income, it can quickly seem like too much to handle. 

    After years of learning the ropes of budgeting with irregular income, I’ve streamlined my process and hope you find it useful for your own budget!