How to Deal with a Fluctuating Income

The following post is from Christina of Northern Cheapskate:

pieces of money

photo credit: TaxCredits.net

It can be really tough to create a budget and stick to it. It can be an even greater challenge when you have a fluctuating income.

We’ve been on both sides of inconsistent paychecks.  I once held a 10-month position which meant that for two months out of the year, I didn’t have any money coming in.   And, we’ve also been in a position in which we earn extra money during the summer months.

When there’s no money coming in, you always feel broke. It can be stressful.

And when there’s extra money coming in, the temptation is very strong to develop lifestyle creep.  When the income goes back to “normal” it can be tough to adjust to not being able to splurge like you once did.

While I can’t say that I’ve enjoyed having a fluctuating income, I have learned to better handle the changes in our paychecks:

Know your expenses.

Make sure you know exactly how much money it costs you to live.  You need to consider everything from groceries to prescription medications to car insurance.  Just because there’s no income coming in for awhile, doesn’t mean that the bills stop coming.

Plan ahead.

Once you know your expenses, you can start planning ahead.  For example, when I had the 10-month position, I took my annual income and divided it out over 12 months. This allowed me to save a portion of each paycheck over the 10-month period so that I would have money to live off of during the two summer months I wasn’t working.

When we’re in a position of earning extra money, we strive to live on what we “normally” get for a paycheck and put the rest into savings.  This is money we can use to replenish our emergency fund, plan a family vacation, or take care of home repairs.  If that extra money is automatically deposited into checking, it becomes very easy to spend it eating out or shopping.

Pick up odd jobs during slow times.

When you’re not working, find other things you can do to make money.  Provide childcare for neighborhood children, pick up a second job (I know several teachers who do everything from farming to masonry work in the summer months), sell items on eBay, or turn a hobby into cash.  Your side projects will bring in a little extra money and they may even provide you with resume-building skills that can help boost your career.

Remind yourself that it’s temporary.

It’s easy to get discouraged when you’re not getting a paycheck. And it’s easy to get lax with your spending when you’re making extra money.  Don’t forget that your situation will change.   The more you can prepare for changes, the better off you’ll be.

How do you handle fluctuating income?

Christina Brown is the creator of Northern Cheapskate, a blog dedicated to frugal living through coupons, freebies, and money-saving ideas. She lives in the rural north woods of Minnesota where she clips coupons, pinches pennies, and chases her three boys (a 7-year-old and twin 5-year olds) as a stay-at-home mom.