6 Essential Money Moves for People with Variable Incomes

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One of the thrills of being an entrepreneur -- one that also goes along with jobs that pay commissions and bonuses -- is the feeling that the sky is the limit on your potential earnings. But sometimes, it can feel like the income sky is falling.

Although the flexibility and lifestyle balance can be great day-to-day benefits, it's easy to get disoriented by the highs, lows and general unpredictability of what one's income will look like month-to-month.

Which is why, if your income is volatile for any reason -- whether you're an entrepreneur, in sales or just don't have a steady paycheck -- you, more than the average worker, need to streamline your finances and set yourself up for success. Here's how:

1. Know your cash flow. Having a variable income makes it even more important to have a detailed and clear understanding of what's coming in, where it's coming from, what's going out, where it's going to, and when it all is happening. Use an online tracker such as Mint.com and ensure you're tracking debit, credit and cash expenses.

2. Categorize.Maintaining a detailed budget will help you to categorize and prioritize for those lean months when you may not have room for the "wants" in your life. Ultimately, you want to ensure you can cover the expenses that are imperative, and with proper planning you should be able to. Categorize your spending to identify select areas that you may be able to cut back on if needed. Typically items such as dining out, entertainment, travel, personal shopping, and other day-to-day "wants" can be trimmed if necessary.

3. Be flexible. The roller coaster ride that is your income could translate into a variable lifestyle as well, with your having funds to splurge on extras one month and then needing to cut back to the bare necessities the next. Be flexible and prioritize your spending to ensure you're paying yourself first before jumping into allocating extras towards fun or discretionary expenses. Ensure your budget Includes savings for personal goals, retirement and emergency cushions and then work in any other extras.

4. Add an extra layer of protection. Everyone needs an emergency fund of three to six months of expenses set aside. But those on a varying income should consider starting with a household expense fund to prevent the drastic swings in lifestyle that can come with the income. During some more lucrative months, set aside three to six months of household expenses to supplement you during the slow months. This will allow you to turn your savings into a paycheck of sorts to funnel in funds needed.

5. Plan for your future. If you're employed, maximize use of your employer benefit programs and retirement plans. Ensure you're not leaving any money on the table and at a minimum contribute enough to take advantage of any company provided matches. If you're self-employed, look into the many retirement plan options for entrepreneurs such as the SEP Individual Retirement Account, a Solo 401(k) or a Simple IRA.

6. Automate. Although your income can vary, calculate a conservative average and use this number to set a monthly savings goal. Schedule bi-weekly or monthly dates to review your spending and income and track where there's room for improvement.

Mary Beth Storjohann is a certified financial planner for Gen Y. She created Nine Steps to Workable Wealth to help you make smart choices with your money.

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6 Essential Money Moves for People with Variable Incomes
Most of us spend a ton of time researching our options when we first sign up for a plan or policy, then forget all about it and make monthly payments like a robot. But this can cost you.

If you've been on the same cell phone plan for a while, or you haven't looked at the terms of your insurance policies (home, life, auto) since you got them, it's time to do a review. Your circumstances may have changed, and new plans or deductions may have come out since you first signed up. Call up customer service (or your agent) and have them walk you through your options if you're having trouble comparing things on your own.
One of the biggest budget sucks is our own forgetfulness. We miss payments and incur late fees because we've misplaced our statement or didn't manage to get our mail out in time. We fail to save as much as we'd like because we just never remember to do it.

The easiest way to save yourself some money (and hassle and stress) is to set it and forget it. Sign up for auto-pay so your monthly bills are automatically deducted from your checking account. Have a certain amount automatically transferred each month from your checking to your savings account. Remove the human error factor, and your budget will be better for it.
We charge so much nowadays -- whether on credit cards or debit cards -- that it's easy to spend a lot of money without really registering it. When you have a set amount of bills in your wallet, however, it's extremely easy to see how much you've spent so far this month and how much is left.

Take those budget categories of yours -- groceries, entertainment, etc. -- and turn them into real, physical envelopes. At the beginning of each month, put that month's allotment of cash into each envelope. When you're running low, you'll know you need to be careful with your purchases. When you're out, you're done spending on that category till next month.
If you're prone to impulse purchases, imposing a waiting period on yourself is an easy way to break the cycle.

For large purchases, a 30-day waiting list is best. Write down the item that's calling to you, then wait 30 days before allowing yourself to buy it. You may realize in that time that you don't need it after all. Or you may forget why it called to you in the first place.

For smaller impulse buys, like that fancy new product you spotted in the grocery aisle, follow a 10-second rule. Before the item can go into your cart, spend 10 full seconds asking yourself if you really need it and how you will use it. Simply analyzing why you're getting something can disrupt the siren call of a product.
It's all too easy to blow $5, $10, even $20 on something, whether it's an extra meal out or a coffee on the run. In the grand scheme of things, it "doesn't seem like much" to us. But if you start thinking of your money in terms of the time it took you to earn that money, suddenly you find yourself evaluating your spending choices a little closer.

Figure out what you make per hour if you're salaried (if you're hourly, this will be easy). Let's say you make $15 per hour. For every $15 you spend, you'll have to spend another hour of your time at work to pay for that item. A coffee a day for a week can cost you an hour or two. And bigger items, like that flat screen TV you're eyeing? You get the drift. Framing purchases in light of time spent can help you make sure something is worth it.
In the end, a budget is simply a means of making sure your money is working for you. It allows you to see how much you're brining in and allocate it towards the things that are most important to you. If you can hold those bigger goals in mind, everyday budgeting becomes easier.

If you're wondering whether or not to buy something, ask yourself if that money would be better spent towards your big goal. Put a visual reminder in your wallet to keep you on task-like a photo of a sandy beach if you're trying to save up money for a trip. Viewing your budget in terms of what it will allow you accomplish-not the things it won't allow you to buy, can revolutionize your spending.
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