If you’re one of the millions of Americans with an irregular income, then you know that managing your finances can be a challenge. Whether you’re a small business owner, an employee with fluctuating hours, someone who works on commission, a seasonal worker, or wait staff whose income depends on tips, you’ve probably faced weeks and months when it was difficult to make ends meet.
With a little planning and some discipline, you can take the guesswork out of paying bills on time and saving for the future.
The first step is determining your baseline, or the minimum amount of income you need monthly to pay all essential bills—rent, utilities, food, insurance and transportation. Start by tracking your weekly expenses for one month using this cash flow budget tool (page 63). You’ll soon recognize the ebb and flow of your cash and where the due dates for your bills fall within the month.
The next step is setting up two bank accounts. The first is one where you’ll deposit all your income, whether that’s direct deposits from an employer, checks from clients, or the cash tips you receive while waiting tables. This account should not be used for paying bills or ATM withdrawals.
The second bank account is one you’ll use to pay your bills either electronically or by check. On a regular basis (weekly, every other week, or monthly), you’ll have your bank automatically transfer money from the first account to the second.
There will be months where it seems you have extra money in the first account, especially if you receive a portion of your income in a large lump sum. It’s important to be disciplined enough not to dip into that account. The money must be available to cover leaner weeks and months.
Over time, you may notice that you are earning more than your living expenses. You can use this surplus for non-essential expenses or, even better, toward a savings account or emergency fund.