Money Management On An Irregular Income

As I think back to some of my previous jobs and career moves of yesteryear, I can’t recall many times in my life when I haven’t had an irregular income. Being in sales, sales management and now being self-employed, my income is nothing short of consistently sporadic, and I have realized that it takes a certain degree of finesse to cope with a financial feast or famine lifestyle. How do I do it? Planning. Here are my four top tips for managing a truly irregular income.

Daily Planning

Long ago, I heard a phrase that stuck with me over the years: “If you fail to plan, you plan to fail.” And while planning used to make me roll my eyes and grit my teeth, my sales experience turned self-employment prowess taught me that proper planning is essential.

I keep two spreadsheets that I work from daily: the first manages the hours I work, like a mini-time card. But it does more than just give me a punch in punch out snapshot. It keeps track of my earnings, my weekly projections and daily business cash flow — functioning as a sort of mini-pipeline. The second spreadsheet is for my long-term pipeline — any payables scheduled 30 or more days out. I check (and update) both daily, keeping them intertwined and up to date. Now, since we are talking about pipelines…

Pipeline Management

I will be the first to admit that having and updating a weekly pipeline in sales was about as much fun as stabbing myself in the eyeball with a spork. I hated it. However, being self-employed, my pipeline is my life. Without it, I wouldn’t know how much money I have in my business account today, or how much I should have by the end of the month. It helps me manage my business cash flow, follow up with deadbeat clients and helps me calculate my salary. I am nothing short of anal about my pipeline management, but I have discovered this attention to detail helps me to not just follow up on accounts receivable and past due accounts, it also helps me come tax payment time each quarter. In short, without my weekly and monthly pipeline, I’d be running around like a chicken with my head cut off.

Moving my Money

When I would make large bonuses, I would pay myself one or two months’ worth of salary in advance. I would put one month in my checking account to cover my living expenses, and put my salary for the following month in my savings account, away from the reach of a once upon a time impulsive buyer. This keeps me from dipping into my business money for personal reasons, prevents intermingling of accounts that need to stay separate and keeps me from overspending my budget. I don’t pay myself a bonus unless my spreadsheets (hours worked) tell me that I earned one — this doesn’t’ t happen often.

Allowances and Disciplined Savings

But how much do I know to pay myself in a salary? Good question. I had to write my personal budget backwards, looking at how much I needed each month in order to pay my bills and to pay myself.

I know how much my business needs to make each month, each week and each day in order to be successful and continue growth. Once I know how many hours I need to work on my business (personal accountability for my success) I project my personal pipeline out far enough to make sure I get to those goals. In order to do this, I have to analyze my working hours, my hourly rates for services and make sure that I’m able to meet (or exceed) my monthly goals. It sounds like a lot of time fussing around with spreadsheets, but once I had the templates down pat, it was easy as pie.

I’ve found that managing irregular income (successfully) isn’t certainly more complicated than what you make it, and for me, my way is ultimately simplistic and straightforward — and only a little spreadsheet intensive.