We all know how a budget can be really helpful in putting your financial life in order. Among the many things that it can help with is in reaching goals. Whenever you have something that you want to save up for, a budget can prove to be essential in making sure that the funds are allotted to that particular goal every month. Apart from that, budgeting helps reduce your credit card debt by letting you know how much you are allowed to spend on it. By giving you a limit, you are kept from spending more than what you can afford every month. This is very important in keeping out of debt.
Creating a budget is simple but it can be tedious at first. You have to detail your expenses and make sure that you income is sufficient to meet those needs. With a constant and regular income, this is easy to do. But what if you have an irregular income? How can you create a budget that depends on a figure that is not fixed?
How to create a budget plan when your income is not fixed
This is a dilemma of certain professionals who receives income on a per-project arrangement. If you are an artist to depends on the sales of your creations or a carpenter who relies on seasonal projects for compensation, then it may be a bit more difficult to create a budget. But while it is difficult, it is not impossible. You just need to make a different set of calculations. Here are some tips to help keep your budget from failing on you.
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List all your expenses. Try to stick to the real expenses that you make – not just your basic necessities. Feel free to include your entertainment expenses. When you have this figure, it should be easy for you to determine how much you need to earn every month. It can be a income target of sorts for you.
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Live on last month’s salary. Since your income spikes at certain months only, it is advisable for you to set up your budget in such a way that you are living on last month’s salary. This could mean you have to work double time for this month or save up enough so that you can set up this arrangement. For instance, if it is August right now, you need to be living on what you earned last July. Anything you earn in August will be spent on September – not August. It is like funding your expenses one month in advance. The idea that your living conditions for the next month is relying on your hard work today is a great motivator to aim for a higher income.
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Boost your savings for the lean months. When you earn more than the usual, try not to spend it all. Save what extra you earn because that can prove to be very handy during the lean months. If you had been practicing your profession for quite some time now, you should have an idea which are the lean months. You need to prepare for these. For instance, a carpenter will have nothing much to do during winter. These are the months they have to save up for.
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Build up your emergency fund. Your savings for the lean months should be kept separate from your emergency fund. This is to be used for health emergencies, when the car breaks down or when home repairs are needed.
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Have a financial plan. It pays to plan anything that you know you will be spending a lot on in the future. These are not only for the once in a lifetime expenses like college education of your children or your retirement. You should also save up for the holidays, birthdays and other events that will require you to spend more than the usual.
If you are unsure about how you will create a budget, you can browse the list of templates on Google Drive. There are several items on this list and you should be able to find a budget plan that will suit your purpose.
Remember your 4 budgeting goals
While the budget that you have to create is different from the regular earners, you both have the same budgeting goals. Even if you are resourceful enough to create a unique template, make sure you satisfy the following goals to ensure that you have the budget that you need.
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You budget should be realistic and you should not have problems following it. Sometimes people create a budget that leaves so much room for savings. However, it leaves them with no budget for entertainment and that makes their lives miserable. Make sure you create a budget you can follow.
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You can track your expenses. Another goal of budgeting is to help you track your expenses to avoid unnecessary spending from happening. Your budget should reflect everything that you spend on.
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You are able to live within or below your means. If you are still overspending, then there is something wrong with the budget that you created.
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You can save money or pay off your debts. A budget must be able to reach your financial goals like saving or paying off your credit obligations. If you cannot meet these with the budget that you created, then you need to build a better budget plan.
Here is a video from Ways and How about how you can set up a working budget that you can follow easily. Get the detailed steps that you can follow to start your budget plan.