Budgeting is essential for everyone, but it’s especially challenging for contract, self-employed or contingent workers. Your job may pay well, but if your gig ends abruptly, you’ll be without a paycheck. Even if you are reasonably confident something new is around the corner, you have to ensure you pay your bills.
Managing your finances doesn’t make money magically appear, but it does help you make monitoring your cash flow a habit. Understanding what you have to pay and when, as well as some smart accounting, can prevent you from coming up short. You’ll also get a clearer sense of where your money actually goes.
List and Prioritize Your Expenses
Make a list of your regular bills. Those include your rent or mortgage, utilities, food and transportation. Include essentials that you only pay a few times a year, like taxes or insurance, averaged out per month.
After you’ve listed out how much you spend per month on these items, continue with other expenses for things like haircuts, clothing and home cleaning supplies. You should also include costs for discretionary spending like entertainment.
The next step is to list items in order of priority. Your list shouldn’t be an “ideal scenario” wish list where you prioritize paying off credit cards before the mortgage. Start with what you need to live: shelter, food, electricity and so on. Each month, you’ll put money towards these items first.
Pay Yourself a Salary
Many people pay bills out of the same bank account they receive paychecks. But if your income is irregular, you’ll have some months where you do well and others where you’re scraping under the couch cushions to find change.
To make sure your money lasts, deposit all of your earnings into a savings account. At the beginning of each month, transfer a lump sum that covers all of your monthly expenses into a different account.
Use this second account to pay all your bills and to cover extra expenses. What you spend is restricted to what you’ve paid yourself. That way, if your earnings are lower the following month, you’ll still have some left in your savings to get by.
Pay Your Bills Multiple Times a Month
Even though you have one amount set aside for each expense, you may find it useful to pay each bill a little at a time. If you receive a weekly check, you may want to pay a fourth of your electricity bill instead of waiting until the due date and paying it all at once.
By paying a little each time you get a check, there’s less chance you’ll come up short because of a miscalculation, overspending or an unexpected end to your job.
Limit Your Discretionary Spending
It’s important to live your life, even if you’re trying to stay within a budget. You have a whole list of extra purchases, like eating out, buying new things and going out. You don’t have to give these things up, but choose which ones you really want.
With every unnecessary expense, ask yourself if you want what you are about to buy or whether you’d prefer to put it aside for something else. If you’re lucky enough to have room in your budget, you can put money aside to have a special evening with friends and family.
Your budget is essential for staying on track financially. Even if you don’t make the same amount every month, you can get by if you are smart about your spending and think actively about where you’re putting your cash.