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How to Budget on a Variable Income According to Graylock Advisors

Budgeting is a process that nearly every adult has to learn to master. The monthly budget is a tradition that people cannot function properly without. However, this process becomes significantly harder when one or more members of a household are operating on a variable income. A variable income may be the result of commission-based jobs or jobs that work on short contracts. No matter the source, individuals can easily have their financial futures derailed by these positions.

The budgeting process

The budgeting process often works by an individual laying out all of their expenses and streams of revenue. They may have an app that helps them or simply use a pen and paper. Then they determine all of their fixed expenses. These expenses, which include rent and car payments, are expenses that are the same every month. Then there are variable expenses such as food or entertainment. An individual first budgets away their fixed expenses and then considers their variable expenses.

They can make a number of executive decisions about their spending and their lifestyle while looking at these variable expenses. Having a variable income makes this process difficult. Budgets work best when they are considered over a period of months or years. Individuals can identify trends and decide if certain regular expenses are well outside of their normal budgetary abilities. A variable income changes this calculation every month and makes these decisions significantly more difficult. Budgets sometimes become so difficult that individuals find themselves in debt and in need of help from those at Graylock Advisors.

Make generous adjustments

The best way to budget on a variable income is to take into account these variations when one is considering what to spend money on. They should look back over a period of months or years and see the full range of an individual’s income. Then, they should ensure that they are spending an amount closer to the lower end of the income scale.

This spending minimizes the chances that an individual will be “caught” by a short period of significantly decreased income. If an individual makes more than they budgeted for, they will simply have more money to spend on their wants and savings, but if they make less, there is the chance that they will miss a payment or have to spend money on credit card fees. Being safe will save an individual a considerable amount of money over time.

Incorporate steady income streams

Sometimes, individuals have such a variable income that they cannot make adequate decisions about their bills. In that case, individuals need to find a way to bring in some sort of reliable revenue. They can do this in a number of different ways. Some investments, such as stocks that pays regular dividends, can bring in a steady income stream over at least a period of several months or years.

An individual may also be able to find a job that only works them a few hours per week. They can count on that extra revenue to make up for their particularly variable income over other periods of time. In addition, an individual can even work within the confines of their variable job if they need to. They can talk to their bosses and managers about projections for future work to help them plan accordingly.

Conclusion

Any individual who has a variable income should start budgeting as soon as possible. They should be conservative with their spending and constantly look for regular revenue streams. They may also need to hire a financial planner or work with a debt consultant like Graylock Advisors if they run into too much trouble with this process. Either way, individuals will only meet success if they are able to stick with their variable income budgeting plans.

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