The rise of the gig economy has drastically changed the nature of work in the US. In 2019, around 16 million people were hired on a contract or temporary basis. It’s estimated that this number will continue to grow, eventually reaching approximately 43% of the country’s workforce. This means that a large portion of our working population will live on an irregular wage.
Because traditional budgeting relies on ensuring that your spending doesn’t overtake your income, it can be hard to keep track of your expenses. If you don’t have a set monthly income, there are a few steps that you can take to get on track.
Determine Necessary Expenses
Before you start budgeting, you must have a set amount of money that you can rely on to cover your basic living expenses. These include food, transportation, and housing. Other common expenses you should consider include medical bills, loan payments, and insurance.
Make sure you have a clear goal and prioritize your priorities regarding budgeting. Once you have a list of your expenses, add up the total cost of each expense to get a baseline.
Calculate Your Average Monthly Spending
You should look back at your bank statements to see what you’re spending money on each month and determine what you can live without. Discretionary expenditures include clothes, shoes, birthday gifts, Gym memberships, and meals out.
Knowing how much you spend in this category can help you make adjustments to keep on track with your budget. Even slight changes can make a big difference.
Save and Create an Emergency Fund
An emergency fund is also important if you have an irregular income, as it can help you get through unexpected expenses such as getting sick or losing your income. Ideally, this fund should last six months, but not everyone can afford to do so.
Even if you can’t put a lot of money into it, setting aside a small amount each month can help you get started.
Find the Average
One of the best ways to manage your irregular income is to live on an average monthly income. This strategy will help you maintain a consistent amount of money and allow you to avoid unexpected expenses.
Save Extra Money
If you have a pleasant surprise, such as a tax refund, a raise, or a profit from selling something you’re not using, you can easily add this to your savings account. This extra money can also help you pay more if you’re prioritizing debt repayment. The interest you’re paying on your debt is typically higher than what you earn in a savings account, so paying extra for this can help you save money in the long run.
Create a Zero-Sum Budget
By setting aside a certain amount of money each month, you can easily budget for every dollar, allowing you to have a total balance of zero at the end of the month. If you have difficulty keeping track of your spending, try reviewing your discretionary spending to see if you can improve.