A lot of professionals, business owners, and freelancers live on a fluctuating income. The growing number of digital nomads and freelancers means there are more people who rely on income that varies from project to project, pay check to pay check. There is nothing wrong with earning a fluctuating income. However, keeping your personal finance in control is a bit more challenging in this situation.

I said more challenging, because there are still ways you can control your personal finance meticulously when you have fluctuating income. These tips and tricks we are about to discuss in this article will help you manage your personal finance better, even when your income is unpredictable.

Start with the Bare Minimum

Rather than worrying about budgeting based on your income immediately, the best way to start organizing your personal finance when you have fluctuating income is by focusing on your expenses first. Start by documenting your regular expenses and working your way towards the more irregular ones.

Figuring out your bare minimum should be easy. You take the loan repayments and expenses that reoccur every month (i.e. your energy bills and internet subscription) as your starting figure. Continue by adding other basic expenses such as meals, transportation, and everything else in between to the equation.

The total is your bare minimum. You will use this figure as your benchmark as you try to organize your personal finance better. As long as you can allocate your income to cover these basic expenses, you can continue to improve other parts of your personal finance as you go along.

Calculate Your Lifestyle Expenses

Other than the basic expenses that you absolutely need to cover, there are also expenses that can be classified as lifestyle expenses. The cup of coffee you buy on your way to a meeting, the cost of traveling to clients’ locations outside of the city, and the money you spend to have fun on weekends or to dine out are all considered lifestyle expenses.

There is nothing wrong with them either. You are allowed to spend your money to have a bit of fun and enjoy a good lifestyle. However, these expenses need to be kept in check when you are living on a fluctuating income. They are the expenses you need to be willing to cut in certain situations, particularly in situations where your income cannot be allocated to cover them.

Set a Baseline

Now that you have your expenses mapped out, it is time to look at your income. Whether you are a freelancer or a business owner, a fluctuating income means you have months where you earn more than you need, and other months when you earn little to no income at all. With better personal financial management, you can manage both situations equally well.

You already know the basic expenses you need to cover, so the first thing to do upon receiving your income is setting aside that amount. Next, before you start budgeting for lifestyle expenses, save a portion of your income for two purposes. Ideally, you want to set aside 30% of your income. Save 1/3 of that 30% for emergencies and the remaining 2/3 for long-term savings and investments.

Lastly, allocate your income for the lifestyle expenses. Remember that you have to keep these expenses in check, even when you earn more than usual. If you have more money to allocate, repeat the steps again, starting with covering your basic expenses, adding money to your savings, and another round of budgeting for lifestyle expenses.

Know Your Options

That last part – repeating the steps when you still have more money to allocate – is important. You are covering the following months while you have money to allocate, giving you the luxury of not having to worry about your fluctuating income.

It is also recommended to understand the financing options you have when you do need to fill gaps in your monthly budget. There are a lot of short-term loans and financing options you can now use to stay financially healthy during times when your income is smaller than usual.

You still have the emergency fund acting as a safety net too. Only resort to using your savings and your emergency fund when you have no other options to explore. If you budget your income properly using tips we discussed in the previous part, you will have a strong personal financial foundation to work on and you will not have to use your savings and emergency fund at all.

These are easy tips you can implement right away. Getting started with managing your finances better is always challenging but overcome the challenges and you will be rewarded with true financial freedom. Maintaining a healthy cash flow and growing your savings account are both easy when you know how to stick to the budget. It won’t be long before you can start investing and developing new sources of income.

Having a clear monthly budget is important in today’s economy. By allocating portions of your income for certain expenses, you can keep up with those expenses and maintain a healthier cash flow in general. A monthly budget also acts as your measuring stick, allowing you to see how you are doing with your personal financial management.

There is, however, one thing more important than having a clear budget, and that is sticking with it. Sticking to a monthly budget is actually more challenging than creating a budget in the first place. Worry not, because you can stick to your monthly budget easily with these 5 tips and tricks we are about to discuss in this article.

Start with a Realistic Budget

The first thing you want to do if you want to be more disciplined with your budget and expenses is creating a realistic budget to follow. Sure, you want to save 30% of your monthly income and invest it later, but that’s not always the right budget to set. If you still have a lot of loans to repay or you have income that fluctuate, setting aside 30% for savings is a tall order.

Creating a realistic budget starts with getting a clear picture of your income and expenses. The latter is easier to review and understand since you can simply use expenses from the previous month as your benchmark. As for your income, start with the regular ones and make changes to your budget as you earn more (or less) during the month.

Write Down Everything

With a realistic budget in mind, the next thing you need to do is document your incomes and expenses meticulously. The simplest way to do this is by writing down the money you earn and spend right after you earn and spend it. Don’t even wait until the end of the day to write things down; you’ll find it easier to document your transactions on the spot.

Fortunately, there are a lot of apps that can help you keep track of your income and expenses in an instant. Some apps will even scan your receipts and automatically add entries using the captured information. The more you get used to writing everything down, the easier it will be to stay in budget.

Make Corrections

Remember that the goal is staying within your budget. That’s how you get to a healthier cash flow and improve your overall financial condition. In order to stay within the budget, you need to regularly review your expenses as well as the income you receive as the month progresses.

Once again, writing everything down – and using an app to help you do that – is important. With expenses tracking apps, you can always check expenses of certain types and categories at any point. You also have visualization of those expenses helping you understand your financial state better.

There are also apps that allow you to input your monthly budget as a benchmark. These apps will automatically tell you how you are doing at any point during the month and even recommends ways you can be smarter with your expenses.

Watch Out for Gaps

Even with the best budget in hand, there are still times when you are hit with an unexpected or uncalculated expense. I often forget about my car insurance renewal; I know a lot of people get surprised by the sudden need to pay insurance premium too. Other unexpected expenses like co-insurance and emergency home repairs also have the ability to create gaps in your budget.

The best way to deal with this type of situation is knowing the right financing option to use even before you have to face a gap in your monthly budget. Thankfully, there are plenty of short- and mid-term financing options you can now turn to depending on your specific needs and requirements.

It is also a good idea to set aside some funds for dealing with this type of unexpected expenses and emergencies. You don’t have to save a lot all at once if that’s stressing your personal finance too much. Set aside 2% to 5% of your income and build your emergency fund gradually.

Work with a Partner

Last but certainly not least, find someone to help you keep up with your monthly budget. If you have a partner that shares the monthly budget, this should be an easy task to complete. For singles and those who live alone, close friends and professional services are just a couple of clicks away.

Having a partner helps in many ways. At the very least, you have someone reminding you when you stop following the plans you set at the beginning of the month. Some of the apps we discussed earlier also support multiple users to make the whole process easier.

Use these tips to your advantage and you will find staying in-budget to be extremely easy to do. It will not be long before you start seeing a healthier cash flow and gaining better control over your personal finance.