During difficult and uncertain times, money may be the first thing to worry about. Since the pandemic hit the economy hard, millions of Americans have filed for unemployment. Many more are also worried about the uncertainty that comes with insecure jobs and a fluctuating income. And it's easy to see why.
According to a study by Bankrate, only 40% of Americans can raise an unexpected $1,000 expense from their savings. This means many will be forced to take on more debt. And now that many of us are taking on side hustles and temp jobs, the fluctuating income may be better than nothing but it can be extremely difficult to save. And this is why.
Challenges Of Having A Fluctuating Income
Budgeting and saving are easier when you have a steady income. You're sure of what comes in, so you can plan. But this is not the case with side hustles. There are months when you will make more money than you spend. And there are days when you may not get gigs and subsequently no income. Therefore, it's important to manage your finances carefully to avoid spending more than necessary. And it's possible to do so.
And fortunately, many people have turned to side gigs or temp jobs and managed to jump this hurdle. So if you're facing the same challenge, here are five tips to make the most of your fluctuating income.
Determine What It Costs To Be You
It may seem obvious, but it pays to know what you spend every month. It will help you make great choices. Once you get a figure, find ways to make it cost less.
For example, when was the last time you looked at services that charge you regularly? Many people continue to pay for subscriptions they don't use. A 2019 study shows that thousands of Americans waste close to $350 every year on subscriptions.
So go through your bank statements to see if there are any. If you find subscriptions that you rarely use, cancel. Also, set up alerts to get notified whenever you're charged. This will help you monitor your money and avoid fraud.
Save As much As possible
Saving money when you don't know how much to expect can be a nightmare. However, it may be wise to commit a percentage of your income to savings. This way, you don't have to worry about focusing on a specific figure.
If possible, aim to save between 10 to 20%. But if money is tighter, strive to save even 4 to 5%. The good news is that you can always save more when you earn more next time.
Don't Forget To Save For Retirement
When money is tight, it's easy to forget about retirement. However, don't make this mistake.
Keep in mind that as long as you're self-employed, you may not have employer contributions. So you have to be smart with money to safeguard your future.
Therefore, as you save for emergencies, make retirement a priority as well. Strive to save whatever you can. This will ensure you will not struggle financially when you retire. Your savings will do the hard work for you.
Work With Goals
When dealing with fluctuating income, it may be a good idea to break down large goals into small weekly or monthly targets. This will keep you focused on your goals even during these times.
Working with goals will also help you avoid spending the little you are making and tracking your progress. So if you lost your main job, you may need to readjust your timelines and amount to save towards your goals.
Managing finances without a fixed income can be tricky especially now when you have so much to worry about. However, you will come out of this pandemic stronger than ever before. What are you doing to make the most of your unstable income?