Are you trying hard to manage your expenses even when there is no consistent or reliable income stream? If yes then you are not alone. With the growth of the gig economy in the recent years and with the increasing number of people day by day in volatile work, thousands of people have found themselves with incomes that fluctuate in a generation ago. This is true that before the coronavirus pandemic hits the lockdown, and it will be true long after it is over.
There are multiple reasons why you may appear to be in fluctuating income. You may have a job, but be on a zero-hour contract that does not guarantee that you will work every week. Similarly, you can decide to start a freelance career and earn income from various sources that vary from month to month.
So, if you are a freelancer, you have just started a new business or have a zero hour contract, here’s how you can manage with your fluctuating income. Read on for advice on how you can create a one sided income to bring in budget, savings, benefits and extra cash.
Turn Your Skills into Money
If you have some extra time, you can replace your fluctuating income with other tasks. Do you have a crafting passion that can make some money online? See Etsy for inspiration. Everyone with a little crafting skill is doing this and some are making good money from online orders.
Also think about teaching your skills. You can do this online or in person in your local area. The hobbies or skills you can teach to bring in extra cash include languages (teaching children or adults who want to learn them), photography or even academic subjects like GCSE English. You can teach anything (and make money) as long as you have a reliable internet connection and a little ingenuity.
This is a great idea if you are on a zero hour contract and find that you are not getting as many hours as you want. Use the extra time to develop your own revenue stream (or streams!) And you can become a winner. Using your skills to teach can also be a great income for students.
Always Be Aware of Lucrative Month
If you are the one who have fluctuating income, then you may also have months that are particularly lucrative for others where your income is low. Freelancers often describe their income as “dinner and famine”, so you certainly are not alone in this.
The important thing is to stay away from your expenses when you have months that will bring you more money. Yes, it is better to go to dinner or buy a new pair of shoes if you have been scraping for months. You definitely have permission to do this! But be extra careful. You need to remember that this money is what you need to see on rainy days that are part and parcel of changing income. So treat yourself a little, but keep some money away during your good months. A good way to start great savings habits is to allocate parts of each invoice to different savings accounts or pots. Save up to 30% on an account for your tax and national insurance bills (if you are self-employed), pay 10% to your pension or retirement fund and at least 10% to a ‘rainy day’ savings fund. Yes, that’s 50% of every invoice does not go into your immediate expenses fund! However, ‘Future You’ will thank you for your foresight. We all have dry months with fluctuating incomes – these savings can really help.
Always Keep an Eye on Your Key Expenses
It is actually most important to know what money is coming out of your account if you are in fluctuating income.
You should keep an eye on your rent or mortgage and how much you usually spend on food or travel, and you add up your monthly utility bills and you will have the absolute basis of what you need to earn to meet your immediate needs. Then add other outgoing ones: for example direct debits to the gym. If you know how much these extras will cost you, you will have a ball park for how much you need to earn to continue your current lifestyle. This will help you to know if you need to cancel direct debits or even reduce certain things – this will help you to avoid getting into debt.
Always Try to Save Your Tax
If you are the person who is on variable income because you are freelancing, slow months may not encourage you to set aside a third of your income for tax. You need a lot to do this. If you do not, you’re going to end up with a nasty shock when January (and your tax bill) arrives – and it’s coming sooner than you thought!
It is difficult to save for the future when your income is not reliable. By putting money aside, you are avoiding magic king it anywhere over the course of a few months. The same goes for saving for your pension (yes, you should do the same). If you are new to working for yourself, it is important to remember that what you are paid for also needs to cover these things. So make it a habit to ask for more money!
You think you have 30% too much of your tax bill – but keep in mind that you need to budget for payments in the account. This is where you have to pay 50% of your tax bill plus 50% next. Then you have to pay the next 50% in July. This is a surprising expense for most of us.
Once you have completed your first self-assessment, you can plan ahead for future years. How? Submit your tax return in April! Yes really. When you file your tax return, you do not have to pay your tax until January. However, this will give you the exact amount you need to pay by January 31st. Work out how much to save between April and next January, dividing it by nine. Allocate that amount plus 50% each month: Then, you will be ready to pay your next tax bill and payments into the account without any shocks. It is very easy to budget when you know the exact amount you will pay.
Make Sure That You Are Having Benefits
It is important that you get all the benefits you deserve. Universal Credit allows for a comfortable income each month. It is also available to those who are self-employed and low-income. You may also be eligible for other benefits such as child tax credits, so make sure you know what they are. These kind of benefits can actually be a great help during your slow months. If it is necessary, you can also get job advice as part of the service. You can see what benefits you have with Gov.Uk’s Benefits Calculator.
Do you have any great tips for those with fluctuating incomes? Did it manage to work for you? We’d love to know how you did this – let us know in the forums.