Episode 178: Tune in for tips for personal finance for self-employed individuals. We’re covering financial planning when living on an inconsistent income for side-hustles and entrepreneurship.
The Challenges with Self-Employed Income
One of the common challenges entrepreneurs and small business owners face is a fluctuation in income. It makes it challenging to make a consistent financial plan when money comes in lump sums or at unpredictable points throughout the month.
As an entrepreneur, it’s common to go through phases of feast or famine. There are months when you’re working hard but working on a small income from the previous month or barely working with more money than usual.
Kevin’s mindset is to always move forward as though you’re in a state of famine. Continue to operate on less and set money aside, and always have work in the pipeline. With proper financial planning, you can get through the low income months without going into debt.
Budgeting Tips for Entrepreneurs
One effective way to budget when you have an inconsistent income is to split the difference. Use the annual average to set your budget, setting aside money to fill the gaps. It’s also important to be consistent with your standard of living— don’t spend more when you have more, don’t accept less when your income is down.
Tips for Living on an Inconsistent Income
When you start a side hustle, set the money you make aside to build a full-time plan, keep it in savings, or use it to pay down bills. Training yourself to live on less than you have is a great way to prepare yourself for periods of fluctuation. A significant portion of managing finances is changing your mindset.
It’s also valuable to have a fall-back plan in place. This approach can be helpful for both entrepreneurs and full-time employees. Consider what threshold you can withstand, and what your plan is to recoup if something fails.
Finally, embrace the fluctuation! Use this opportunity as a source of motivation to grow your business and manage your finances more effectively.
Visit Marc at Vitaldollar.com for more information and valuable side hustle resources.
Disclaimer: Kevin and Sean are not professional financial advisors. Do not take any advice they give without first speaking with a professional and performing your own due diligence.This post may include affiliate links.