How to Pay Bills When Your Monthly Income Varies

How to Pay Bills When Your Monthly Income Varies

Increasingly today there are many Americans that are self-employed or earning side income in addition to a regular job to make ends meet. In fact, the number of self-employed Americans has gone up year after year, with 15 million Americans listed as self-employed in 2015, according to the U.S. Bureau of Labor Statistics.

Self-employment often can mean a variable monthly income where income comes in at different times of the month and in varying amounts. Budgeting with a variable income can be challenging at times. However, you can plan for it with some proactive thinking ahead.

1. Start With a Budget in Mind

Look at your income in the last year. Create a list of all your expenses, starting with repeating monthly bills such as your mortgage or rent, insurance (health, home, renter’s, car and any other), utilities, loans, credit card bills, car payments, food and retirement savings. You may find writing out your expenses manually is the best way. Other options include entering your expenses in a free financial planning app like

Make two columns where you have the listed expense based on your statement and then the amount you want to allocate for it. For example, if you are running late on a utility bill and had a late fee attached, your immediate payment may be higher, but on a regular basis it could be $50 less. Next, take a look at your annual expenses. What are some of the expenses you have every year besides your monthly bills? Finally, look at additional expenses you may incur such as travel, entertainment, clothing, shopping or other things you purchase. Consider any emergency expenses you may have had previously that you did not plan for or expect. Think about savings buffers you will need. Write down every expense you can think of so you have a full picture of your actual expenditures every month and over the year. This will help you define what your real budget needs to look like, how much you need to earn and what money you have left over for your savings.

2. Prioritize

Now, taking a look at your list of expenses, prioritize them. What’s essential and must be paid immediately? What’s desirable but not required? Put dates beside your expenses. Put “urgent” at the top, followed by “important,” and “desired but not required” at the bottom. Now look at your list again. You should be able to see what is truly relevant and what expenses can wait. This will help you identify what your bare-bones budget looks like and how much room you have in your budget every month for any additional expenses.

3. Pay by Priority

As you receive income, make payments going down your list by priority, covering your rent or mortgage followed by food, transportation, insurance and any other immediate expenses. If you are unable to cover all your expenses, that is OK. When your next payment comes, continue down your list to the next item to be paid. After you have met all your expenses, if you find that you have extra cash left over, you are free to use that money in any number of ways, including saving cash, paying down debt or buying something you want.

4. Review Periodically

Your income may change dramatically over the course of the year. Perhaps your work is seasonal with very busy periods and quieter times. Plan accordingly. For example, if you are earning twice your monthly income during the summer but are finding the winter period very slow, you will want to be sure to put aside some money during the summer months to cover the slower period. There may still be times where you find yourself short on cash or with a list of payments left to finish over at the end of the month. However, by being organized about it, you will find the process less stressful and much easier to manage.

Financial Planning: It’s About More Than Money

Life planning is different than traditional financial planning because the focus is more about who you are and who you want to be than it is about money.

Unlike people engaged in the traditional planning process, people engaged in the life planning process don’t look ahead to figure out how to maintain their current lifestyles in retirement. Instead, they look at how to change their current lifestyle to achieve the lifestyle of their dreams.

Read on to discover how you can use this approach to financial planning.

The Ideal Lifestyle

Many people credit the baby boomers for this trend – former flower children who grew up and were absorbed by corporate America, but who never lost their ideals. Just as the boomers redefined their “golden years” as a time to be more active than their predecessors were, some want to go a step further and redefine themselves.

For these people, the concept of money is intertwined with the concepts of spirituality, creativity, family, service and other emotional aspects of personal satisfaction. Happiness is measured in more than just dollars and cents. It’s not, “he who dies with the most toys wins,” it’s “he who gets the most out of life wins.”

For many, it’s more of a lifestyle change than anything resembling the retirement-planning process most of us are familiar with from 401(k) seminars at work or meetings with a financial advisor. The doctor who wants to be a painter, the law clerk who wants to be a poet and the city-dwelling office manager who longs for a cabin in the mountains are all increasingly turning to financial-service professionals for help in making those dreams come true.

Of course, the money plays a big role too.

Money and Sacrifice

There’s just no escaping the money (or the lack thereof). The mailman who wants to become Bill Gates is probably out of luck. However, the attorney who wants to trade in her suit to pick up a hammer and open a repair shop might be able to do it in cash. The others have to make choices, so they work with a financial advisor in order to determine how to develop the financial plan that will allow them to realize their personal goals.

Rather than trying to earn more money or build a bigger nest egg, a significant number of people need to make do with less in order to achieve their goals. Giving up the big house, trading in the BMW and skipping the month-long trips to Europe can help decrease expenses and enable people to trade in their day jobs for lower paying, but personally-fulfilling, professions and past-times.

If living in a small apartment frees up enough cash to increase time spent on the golf course, some people are willing to make the trade. In order to exchange the stress of corporate management for the quiet bliss of a career grooming pets, some people are willing to take a significant cut in pay. When you don’t like what you’re doing and know how you’d rather spend your time, life planning can help you make the transition.

It’s Your Life

If your goal is simply to retire, still be able to pay the bills and maybe a take a few trips each year, that’s one thing. If your goal is to trade in your spot in cube city for a spot behind the counter at your own bakery, that’s another thing entirely. Instead of asking yourself, “How much do I need to save,” ask yourself, “How am I willing to change my lifestyle in order to achieve my goal?”

From there, it’s more about the mechanics of orchestrating a transition than it is about saving a certain amount of money or earning a certain rate of return on your investments. Just as each person has his or her own definition of happiness, the decision to pursue a lifestyle change is highly personal. It can involve enormous upheaval, but it can also result in enormous satisfaction.

Prior to taking the leap, you should carefully examine your motivation and your financial resources. Then all you have to do is come up with the plan that will get you there.