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7 Tips for Saving When Your Income is Not Steady

In the last few years, thousands of people have joined the “gig economy”. Instead of having a steady paycheck to manage, they receive income from projects and contracts that pay different amounts at different times of the year. 

If you’re a “gig” contractor, or if your income is simply unpredictable, it’s not easy to juggle day-to-day expenses, pay down debt, build up your retirement, and save for a rainy day. The urge is always there to take an unexpected paycheck and just “blow it” on an unnecessary expense.   

However, when you have irregular income, it’s extremely important for you to build up your savings reserves, so that you can get through the lean times without going into debt. These seven tips can help you create a solid savings plan.

1. Establish a bare minimum budget.

Build a plan based on the minimum amount of income you expect to receive in a given month, and limit your spending to less than that number. 

If you’re not sure what your minimum income will be, find clues by reviewing your bank statements for the last 12 months, and make note of the deposits you made. If there’s a chance that you’ll receive no income at all during some months, stick with a budget that will allow you to comfortably use your savings until it can be replenished.

Once you’ve figured out your income, add up the minimum amount of expenses you can expect for each month. Use our free budget planner to help calculate the total. If you find that you’re spending too much, look for easy ways to cut back. Use coupons when you shop, try packing a lunch at least once a week, and look for inexpensive forms of entertainment. For more ideas on how to save money, read “101 Ways to Save a Dollar a Week”.

The goal is to use minimal savings, and no debt, to pay for living expenses during the times when you have little cash flow. Then, when you do receive extra pay, it will be easier to use the additional funds to build your nest egg or to reduce your debt.

2. Create a savings routine.

Just because you don’t receive a regular paycheck doesn’t mean you can’t save regularly. Set up an automatic system to move money from your checking account into your savings on an ongoing basis. Schedule the deposit to take place at regular times, such as the first of the month, or every other Friday. Pay attention to the balance in your checking account, however, to make sure it is not overdrawn. 

Even if you’re only able to save a small amount, such as $20 or $30, it will add up over time. You’ll be boosting your savings without much effort.

If you’re self-employed, or otherwise don’t have taxes withheld from your paycheck, you may want to create an additional automated savings routine to help you pay your income taxes. Read the articles in our Income Tax Guide for more information.

3. Pay recurring bills automatically.

Consider using electronic bill pay to automate payments that are the same amount each month. This way, you can eliminate the risk of forgetting about a payment and incurring the late fees, which can drain your savings.

When you pay debts automatically, you have no choice but to establish a budget, because you’re forced to calculate the amount of money that will leave your account, and when it will be withdrawn. Just as with your automated savings, you will need to monitor your account regularly to make sure an upcoming bill payment won’t cause the entire account to be overdrawn.

4. Create savings targets. 

Create a savings goal for every month or quarter, and reward yourself when you reach it. Many people with irregular income aren’t able to put aside money regularly because they focus on their expenses instead of their reserves. It should be the other way around—one of the first priorities in personal money management should beto create a savings cushion. Then, when you receive bonus pay, you’ll be more prepared to bank it or pay down debt instead of wasting it on an unnecessary expense.

5. Write down financial dreams and review them often

In addition to creating savings goals, write down your overall financial wishes. Your own vision may be to have a comfortable nest egg for retirement and a secure emergency fund worth several months of income. Maybe you want to stop struggling with debt and eventually become debt-free. Perhaps you want to save up for a dream vacation. Or your financial goals could be all of the above.  The lesson to remember is that if you write down your dreams and review them regularly, you’re more likely to achieve them.

6. Look for an interest-paying savings account. 

When you have cash saved up, don’t let it sit in an account that’s not earning interest. If it’s for your emergency fund, find a savings vehicle that pays a return while offering some form of account protection, such as a money market account or certificate of deposit. (Banks offer protection via the Federal Deposit Insurance Corporation, or FDIC, and credit unions offer protection through the National Credit Union Administration, or NCUA.)

These accounts should not represent your entire investment strategy, but they can offer some return on the money in your cash reserves. To learn more, read our article on different places to put money

7. Check your progress.

After you’ve been able to build up your nest egg, add up how much money you’re saving, and review the numbers on a regular basis. Once you hit a goal, celebrate! Remind yourself how much you’ve been able to put aside, despite having an irregular income.  When you acknowledge your success, it can help motivate you to continue saving.

Follow these seven steps to help boost your cash reserves. Even if your paycheck doesn’t come every two weeks like clockwork, you can manage it well when it does arrive. By doing so, you gain control of your finances and can secure your financial future. 

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