Author Topic: Stuck in paycheck to paycheck cycle due to irregular income.... Help, please!  (Read 3832 times)

Freelancebudgetfail

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Mustachians, please help. I've been reading here for a very long time and have done a lot of searching, but I am still struggling and really, really need to be out of this paycheck to paycheck cycle.

I am a baby mustachian, and I have absolutely zero debt, credit cards, or loans of any sort. This is probably the only thing saving me right now, to be honest. My main problem with budgeting is that I have the most irregular income of anyone I know. Mathematically, I do make enough to pay my bills and save... Although it's by a very slim margin.

The problem is that I get paid pretty much daily, and the amount varies depending on effort, luck, if I've released new content, etc. Some days I will make $14, and some days I will make 200, and there's really not much telling how much I will make until the day is over. Then, it takes a week for the money to get from my work account to my bank. So, for example, today is Friday, & I just got money in my bank account for last Friday's work.

If I add up everything I made last month, then I have enough for my theoretical budget to work and still have cushion to put back and save. My problem is that I can't seem to get ahead enough to do things like buy groceries in bulk. Being able to be ahead enough to do things like that is the only way for my budget to actually work. Sometimes, on the days where I make like $14, I have to do a single days worth of grocery shopping, even though it's not the most cost-effective way to do it. Likewise, I should have had enough money to be able to save last month, but I didn't get to put anything back into my savings account because spending little bits of money everyday for groceries made it difficult for me to pay my actual bills.

I've got a fairly significant expense coming up, and I'm working extra hours and putting in more time right now, and I'm seeing my income go up slowly. I don't want to be caught in a trap where I am making a little bit more and still in the same position. Do you have any advice for me? I could really use the help. If there is any more information that you need, I'll be happy to provide it.
« Last Edit: January 22, 2016, 11:41:22 AM by Freelancebudgetfail »

Papa bear

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 Secure a new or supplementary position for income.


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Amanda

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It's hard to offer advice without your actual budget to examine.

However, in general terms I would advise making drastic budget cuts in the short term. Cancel everything you can, eat as simply as humanly possible, and work as much as possible. If you do this for one short month you could get "ahead" of your pay cycle by a week or two. With this cushion to aid you, you could then add a few things back in and cultivate a better budgeting and spending pattern. As a freelancer your goal should be to spend according to your budget no matter how high your income and have the cash reserves to buy in bulk, etc.

Could you handle a month of eating very plain and inexpensive food? Oatmeal for breakfast every morning, only the cheapest fresh fruit (apples and bananas?), Peanut Butter, Beans and Rice, etc? With only a $20 bill you could buy enough calories to get through a week, even if it wasn't your favorite week ever.

charis

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I agree with the cost cutting measures suggested.  But as long as you are spending within your means, using a credit card would solve the problem of buying ahead to save money.

lbmustache

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I think you need to plan more long term.

What is your average income per month? What are your expenses per month? Since your income seems random and you don't have much cushion for anything I would try to figure out expenses to the dollar. (e.g. not "I spend ~$100 on food/mo.") That will give you a good baseline.

I agree with cutting out anything extra. I think since your earnings are so random, you are spending everything you earn with 1) the fear you might not have money later on or 2) without any real budgeting in mind.

dleavitt

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Have you done the math to see what your income is on an hourly basis over the course of a month?  Assuming an 8 hour day, your $200 days are $25 an hour which isn't bad.  If those are most of your days, I'd agree that cutting expenses should be the focus.

If most of them are $70-80 days, you might want to consider a more consistent and better paying day job and continue freelancing on the side.

Freelancebudgetfail

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Oh my goodness, thanks already for the outpouring of help.

Yes, I am okay with eating quite simply. I'm responsible for feeding me, two teenage boys, and a kindergartner. We eat relatively simply now, but could ratchet it back.

My bills are:
$500/month rent and utilities (low because I do work around the house and feed the kids, it's a commune situation)
$140/month for meds
$80/month for kindergartner's homeschool coop fees
$200/month for childcare on the day per week where I am working
And then groceries for me and kiddos.

I work about an hour a day on site maintenance, emails, etc. One day a week I set aside to make content for the week and have someone watch my little one. I work about six or eight hours that day.

Lowest months are around $800. Highest months are around $9500, but they are quite rare. Maybe once a year, once every eighteen months. An average is closer to 1500/2000. I also get between $100-600 in amazon gift cards monthly from kickbacks/referrals etc, which I try to use for presents, household needs, etc instead of "real money".

My income is trending up slowly but steadily as I build my business and mailing list and such. It's slow but I get to stay home with my kiddo, and homeschool her. I'm living sort of a  retired lifestyle and I known I can make it work better than it is if I can just figure out *how".

Thanks so much for volunteering your help and experience.

braje

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Your list of expenses look incomplete. I think you should start tracking everything you spend.  You list has nothing listed for items like insurance, clothing, transportation etc

Freelancebudgetfail

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We have insurance for free as we have tribal benefits. I do not have a car, I bike everywhere. I tend to buy clothes from garage sales when I do buy them for myself. Maybe $10/year? With no job to go to I can get away with being the barefoot hippie I am and don't need to worry about looking professional. My daughter is in a clothing exchange, we get new to us clothing every season and pass the smaller size down to another person in the chain.
« Last Edit: January 22, 2016, 01:04:36 PM by Freelancebudgetfail »

protostache

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Two pieces of advice:

First, track every single penny that comes in and goes out, including the gift cards. When you have irregular income it's vital to know what your expenses are because those are the easiest to control. Also remember that those gift cards are taxable income just like the other revenue. You should be setting aside at least 30% of all incoming revenue for taxes (obviously if it's taxes or food, food comes first). Consider using software like YNAB, it was essentially designed specifically for your use case.

Second, you need to have all of your business revenue and expenses flow through a separate, independent checking account. Once you have your cash flow nailed down from step one, you can start transferring a regular planned amount out of the business checking into the account where you pay your household bills and buy groceries. I personally have this set up as a monthly transfer but you could have it weekly or twice a month if that works better for your household budget.

okits

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You need an increase in income, even temporarily, to help you break the cycle.  That, or a drop in expenses (even temporarily.)

Can you work at a time where the two teenagers can watch the kindergartener, and save you the childcare costs?  What can the teenagers do to earn a bit of money?  Even $100/month apiece is a 10% increase in the household income.  They are definitely old enough to pitch in if you're living so close to the edge, and it's good for them to know that everything comes from somewhere (the money to buy groceries, the labour to run a household, the effort to care for and teach a small child, the time to earn income, etc.)

Agree that expense tracking is a good idea.  Even more, track every grocery item you buy so you can see where you'd save if you could just buy bulk during sales.

If it were just you I was going to suggest intermittent fasting, but the concept is relevant.  If you can do without something for a short while that will shrink expenses and allow you to get ahead, this seems like low-hanging fruit.

(And kudos, BTW.  Three kids, home school, solo-parenting?  It sounds like you are working hard and just need to optimize a bit to make some good progress.)

former player

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This thread might be useful to you in trying to get that monthly $140 prescription for less -

http://forum.mrmoneymustache.com/ask-a-mustachian/good-rx-any-good/msg947979/?topicseen#new

Other than that, I don't see how you could be doing much better on the figures you give.

I agree with others that you need to track money earned, money deposited in the bank account/gift cards and money spent.   If you can work out what your average earnings have been and then spend just a little less, you will gradually build up a reserve in your bank account that you can use for bulk purchasing, etc.  You should aim to grow a balance in the bank which covers -

a) a month (more in the future) of bare-bones expenses
b) savings for expected future expenditures over the bare bones budget
c) savings (eg equivalent to a month's bare bones budget) for emergencies/unexpected expenditures.

Anything on top of that should go to long-term savings in a tax-advantaged or retirement account.

Where does the money go when you do get one of those big pay days?   In future, use it to fill up your accounts in the order given above.

AlwaysBeenASaver

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Here's my recommendation. Open a new savings account; make sure that it will allow incoming and outgoing transfers with your current bank account. For the next 10 months (through November), every time you have income come in, transfer 10% of it to the new savings account. This could be tough at times, but it will really help you get on track. After 10 months, you will have an average monthly amount of income in that savings account. So then transfer everything in your day-to-day account into that savings account, set up your incoming income to go directly into that savings account, and on the 1st of every month transfer your budget-monthly amount from there into your checking account, and live off that. At this point it should no longer be a problem that your income comes in unevenly, because you're living off prior-month income rather than the current month uneven income.

SwordGuy

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I think you've gotten several gems of advice.

.A side job to raise a bit extra cash cushion.
.Side job for the teens to raise a bit of cash.  (It's good for them, too!)
.Cut expenses to the bone for a month or three.
.Track all income and expenses until you know where the money is actually going - and then change behavior so it goes where it needs to go first.
.Set aside 10% of ALL income into a savings account for 10 months, then live off that amount each month.  (Unless you get a huge month in that, then live off  a bit less).


Freelancebudgetfail

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In re: what I do during the big windfall months, I usually go out to dinner with the kids, take care of any pressing home repair, and then use the rest for taxes if I need to or to reinvest in my business.

Thank you all very much for the fantastic advice. It looks like I have quite a few actionable items that I can start taking immediately to help get out of this rut.

To the person that sent me kudos, thank you. I often get a lot of flack about what I'm depriving my children of by not having a real job, so it is lovely to hear from people with similar values that they see the value in what I'm doing.
 
I'm going to keep watching this thread, put into action the things that I have gotten from you guys already, & I will report back soon!