Ed note: Working for yourself might sound like the new American dream. Set your own hours. Be your own boss. But it isn’t all sunshine and roses. Our contributor Miel, from DINKS Finance, dives into one of the tougher areas of self-employment. Leer en español.
A 9-to-5 job provides stability in the form of a biweekly (or monthly) paycheck. Some salaried jobs offer medical and dental benefits as well as paid vacation. But what if working for someone else just isn’t your thing? Would you (or could you) give up your regular paycheck for the chance to do your own thing, follow your dreams and work for yourself?
Many people would say yes. But before you take the plunge into self-employment there are a few things to consider when it comes to budgeting inconsistent paychecks. If you are starting a new business it may be awhile until you have money coming in; setting a budget and having savings can help avoid a potential financial crisis.
I experienced this a few years ago when I was working in financial sales. I worked for a corporation but my income was 100% commission. I was sold on the flexible hours, the freedom of not being tied to a desk all day and the unlimited earning potential.
What they didn’t tell me was even if I had no sales, normal employee-paid expenses such as taxes and employment insurance would still be deducted. There were several weeks where not only did I have no income, but my paychecks were actually negative and my employer took money out of my account. Inconsistent paychecks made it very difficult to budget, but with time I learned how to adjust my expenses with a variable monthly income.
Three tips to manage your budget with inconsistent paychecks:
Try to plan ahead. Ideally you want to start out with a bit of a safety net and have a reserve available for leaner months.If you are taking on contract jobs that have a definite end date, such as seasonal work or contracts that are project-based, try to plan ahead for what will happen when the contract ends. If you start looking for new contracts after your work is over you may find yourself without a paycheck for a few weeks. Planning ahead and lining up new contracts will make your variable work become more stable.
Keep expenses low. If you work as a freelancer or at a part-time job, your hours and income can vary and may not be guaranteed. The key to being able to pay your bills on time every month while enjoying the benefits of being a freelancer is to keep monthly expenses to a minimum. If you want to treat yourself or splurge, pick up some extra work or even a contract-based project that will give you a little extra cash. Base your regular monthly expenses on the bare minimum and consider any income above what’s necessary to be a bonus.
Set your priorities. If your income is inconsistent sit down and rank order what is highest priority for you. For example, you’ll probably want to list things like rent, food and utilities as high priority. Things like magazine subscriptions, entertainment or eating out may be lower priority. Once you know what your priorities are, you are able to better position yourself in the event of a shortfall. This also gives you a sense of your future needs and facilitates your ability to plan ahead.
Miel would also like to credit her friend and colleague Tahnya Kristina for her insightful comments on previous drafts of this posting.
If you just finished playing your favorite MMOG where you pwned a n00b, then you likely already know everything you need to know about the San Diego Comic-Con. But, if you – like me – have come into the world of comics through Tobey Maguire’s portrayal of Spider-Man and the wildly successful Ironman/Captain America/Avengers/etcetera franchises, then Comic-Con might seem a little bewildering and overwhelming. What is cosplay? And people pay HOW MUCH for old comic books? We’ve got some answers for you. Leer en español.
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Ed note: Are your summertime activities getting stale? With minimal work – and money – you can add a few new destinations, games and more to your repertoire!
To help you round out your summer bucket list, we’ve come up with a few low or no-cost suggestions the whole family can enjoy.
- Take Up a New Sport. Most parks have free tennis and basketball courts or baseball diamonds. Make a plan as a family to learn a new sport by practicing together a few times a week.
- Volunteer. Introduce your child to philanthropy at an early age; they’ll be more likely to continue when they get older. Start by heading to the local shelter to walk dogs, signing up to help with the community garden or agreeing to paint for local projects.
- Set Up a Fun, Water-filled Amusement Park… in the Back Yard. Who needs a fancy water park when you can make water balloons, set up a game using sprinklers (check out some sprinkler game ideas here), and fill a kiddie tub with a hose right in your back yard?
- Partake in Free Summer Movie or Concert Series: Many community organizations organize free or low-cost movies and/or concerts during the summer in area parks and arenas. Check with the Chamber of Commerce to find out what’s going in on your neck of the woods.
- Have a Game Night. Pick one night a week to have family game night. Plan some fun snacks, pick 3-5 games to play (depending on how long it takes to play them) and come up with a reward system for the winner (maybe winner picks what’s for dinner the next night or what snacks to keep on hand for next game night).
- Get Crafty. A quick trip to the local craft supply store will have kids busy for days. Grab all the essentials to help them make their own scrapbook of their favorite summer memories or a vision board for what they’d like to accomplish this summer, a homework chart for school, or gather up old picture frames and furniture and let the kids go crazy painting them new, fun colors.
- Write a Play. Tap into your kid’s creative side by having him or her gather some friends and create a play. They can write the script, build a set, hold rehearsals and perform once everything’s perfected.
- Check out the YMCA: Fitness classes. Organized sports. Language classes. Babysitting courses. Check in with your local branch to see what options they offer.
- Hit up the Library: Libraries are the jackpot of fun things to do, from story or music time for little kids to book clubs, scavenger hunts and crafting sessions for the older set.
- Wherever your summer takes you, remember to make time to relax and kick back with your family. After all, having dinner together and chatting about your day is always free.
Ed note: The contracts of big-time athletes can be mind-boggling. Our tax expert and resident fanatic Mike Slack breaks it down though, looking at what these sports stars are really making and how much goes to the federal government. There are many new faces walking into NFL training camps this week. Of the 256 football […]
We continue our series on the Affordable Care Act and how it affects you. See all of our Health Care posts for more information. How much is the penalty for not getting health insurance? The penalty for the first year is either $95 per adult and […]
Ed note: It is officially vacation season! Whether you are headed to the beach or mountains, across the world or in your own state, there are a few universal truths: 1) you can’t take your whole closet and 2) if you do, you’ll literally pay for it. Shannyn Allen is here to help you hack […]
Ed note: Relaxing on the beach with a good book – now doesn’t that sound nice? It would be even better if that book could benefit your finances all year round. Luckily, Ben Edwards has some great suggestions for light summer reading that will also provide you clear benefits. If you do nothing else this […]
Ed note: Some things can just be intimidating. For me, car maintenance is one of those things. However, it’s also something that can be very expensive at your local shop or dealer. Here are few ways to perform basic car maintenance to keep your car running well in the summer heat, while also saving a […]
Does it seem like you can raise money on the Internet for anything? Your favorite childhood television show: yup. A new movie: yup. Potato salad: yup. We looked into this new wave of crowdfunding and uncovered what makes a project successful. Leer en español. Click to view larger image Like this infographic? Use the code […]
Now that you know which tax documents you should keep and how long to store them, it’s time to manage the hoard of paper. P.S. here’s a list that includes guidelines for more than just tax documents. Leer en español. Paper storage isn’t bad, however, it can be difficult to manage – since it requires physical […]