For many people earning an irregular living through the gig economy, traditional advice on how to budget is somewhat irrelevant.
Such advice is easy to follow if you earn a stable monthly income. However, for those whose income fluctuates from month to month, a different set of principles might be worth exploring.
Let’s take a look at a few ideas for how you can budget when your income is irregular.
Create a Baseline of Essentials
To create a budget when your income is irregular, first determine the baseline of what your minimum expenses are going to be every month. These are things that you cannot do without and are nonnegotiable.
Examples of essential monthly expenses might be rent, water and electricity, food, petrol, and debt repayments.
Once you have successfully listed each essential item and determined their respective amounts, you can add them up to find out what your bare minimum monthly cost of living is going to be. This will allow you to determine how much money you need every month to break even and survive.
Use Averaging
If your income fluctuates from month to month, then a useful way to craft a budget is to determine your average monthly income. This can be calculated by adding up your income over the past 12 months and then dividing it by 12.
Averaging your income allows you to plan more effectively. On months where you earn above average, you can put the excess income aside to mitigate the shortfall on months where you earn below average.
By doing this, you can have more certainty when planning your budget and determining what you can afford and what you cannot.
Identify Flexible Expenses
Identifying your flexible expenses is handy because it tells you which expenses you can cut out should you hit a slump in your income.
Examples of flexible expenses might be tyour Netflix subscription, entertainment budget, or clothing budget. These are the types of things you can technically do without for a time, if necessary, should your income be less than average and you don’t have enough funds to carry over from previous months to mitigate it.
Here at OTT Mobile, we offer cash vouchers to enable you to manage your finances more effectively. Get the benefits of dealing in cash while also enjoying the convenience of digital finance.
Frequently Asked Questions and Answers:
What is the best way to budget with irregular income?
The best way to budget with irregular income is to first create a baseline of essential monthly expenses and then use averaging to plan. By calculating your average monthly income over the past year, you can better manage periods of higher or lower income.How do I calculate my average monthly income?
To calculate your average monthly income, add up your total earnings over the past 12 months and divide that by 12. This will give you a more predictable figure for budgeting.What are essential expenses when budgeting?
Essential expenses include things that you cannot go without, such as rent, food, utilities, petrol, and debt repayments. These should be prioritised in your budget.How can I handle months with lower income?
During months with lower income, consider cutting back on flexible expenses like entertainment or subscriptions. Setting aside excess income from better months can help cover shortfalls.What are flexible expenses in budgeting?
Flexible expenses are those that you can temporarily reduce or eliminate if necessary. These include items such as entertainment subscriptions, clothing, and non-essential purchases.How can OTT Mobile help with budgeting?
OTT Mobile offers cash vouchers that help you manage your finances more effectively. These vouchers allow you to enjoy the benefits of cash while taking advantage of digital finance solutions.Can I use OTT vouchers to save money?
Yes, OTT vouchers provide a way to save money by enabling you to budget effectively, allowing you to control how much you spend each month and where.How do OTT vouchers work?
OTT vouchers work by allowing you to make digital payments while dealing in cash. You can purchase the vouchers from certified outlets and use them for online transactions, helping to keep your spending in check.