Whatever field you’re in, financial planning is crucial. It can feel overwhelming at times, and it’s hard to make it a priority when you’ve got a million other things to tick off your to-do list.
It’s also extra difficult when you work for yourself and have an irregular income that changes month on month, depending on how many clients you’ve been able to secure.
Making sure your long-term financial planning is in check lifts a massive weight off your shoulders, so buckle down, whip out your calculator, and start crunching those numbers.
Step 1: Run a trial month
1. First off, you need to be totally clear on how much money you need to comfortably live off each month. Calculate an estimate of how much you think you’ll need per month.
2. Then, create a budget for your trial month. Make sure you haven’t forgotten to include anything important: gym membership, dog food, health insurance, shoe fund (that last one is a joke… maybe).
3. Go through the month using your budget, and adjust it as necessary depending on how much you spend. It’s important that this trial month is reflective of the lifestyle you ACTUALLY live – don’t spend the month buying budget groceries if you’re a restaurants three times a week kinda woman (no judgement here – you do you!).
4. At the end of the month, decide whether your budget was accurate, and if you’d be able to happily live off that exact month each month.
Step 2: Build up a safety fund
Without the security of being an employee, you need to make sure you can cover yourself financially if anything were to happen that would prevent you from being able to work for a couple of months.
Since your trial month has taught you what your baseline is, aim to save up enough to keep you comfortable for 6-12 months. If necessary, take on some extra work or spend less for a while until you can build up your safety fund. Hopefully, you’ll never have to actually dip into it, but it’s crucial to have just in case.
Step 3: Live on the same budget each month
It can be very tempting when you get an unusually large payment to head straight to the shopping street to buy that bag you’ve been lusting after for months.
While it’s great to celebrate your wins and treat yourself from time to time, in general it’s a good idea to live on the same budget month to month.
When you do score a big client and get an amazing paycheck, try and save more than usual to boost your safety fund (or your vacation fund, or any other kind of fun savings account you have).
Step 4: Look ahead
Make sure you’re always aware of any large expenses coming up in the next few months. Maybe your kid is doing a summer camp, or you want to take your mom away on a special vacation to celebrate her birthday. Or maybe you’ll have big mortgage payments due in the coming year.
Set aside time each week or month to go through your long-term financial planning to see if there’s anything that should be on your radar. You can then adjust your saving goals per month depending on what you’ll need to save.
Long-term financial planning with an irregular income is totally do-able as well as totally necessary – it just requires a little extra organization and dedication.