4 Strategies to Deal with Uneven Paychecks

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Strategy 1: Create a Budget

1. Through budgeting, we become aware of our spending habits.

2. Reviewing transactions makes clear the categories of spending that are costing us the most and least.

3. Tracking transactions also allows us to create averages for both income and expenses

Strategy 2: Maintain an Emergency Fund

1. Keep 6-12 months of expenses in a cash emergency fund for the periods where income is slow.

2. An emergency fund is there to relieve the stress and provide a cash flow buffer for you and your family. 

3. Only draw on emergency funds for necessities, not for the niceties or luxuries of life. 

4. Pay yourself first, If you dip into your emergency fund, fill your emergency fund back up at the first chance you get.

Strategy 3: Diversify Income Sources 

1. Income diversification leads to resilience in slow times

2. Consider picking up gig or piece work to even out your income.

3. Voulenteer your time when you’re in a slow period. Although not directly cash producing, involving yourself in the community can lead to odd-jobs and network building.

Strategy 4: Find your Expert

1. Consider your time, aptitude, and ability to manage finances. A financial advisor can help to save you time, providing educated opinions and personalized recommendations.

2. Meet with more than one advisor before choosing the right one for you.

3. Not all advisors are equal. Financial advisors are held to either fiduciary standards or suitability standards when making recommendations. Understand the difference and which standards the recommendations you receive are being held to.

4. Understand your advisor’s incentives. Do they receive commissions from the products they recommend? Fee-only advisors do not accept commissions. Instead they are only paid by their clients.

Summary

Variable income makes smart financial planning important. 

Variable income can be a risk if it is not managed correctly. Missing bills and taking on debt until the next paycheck comes in is not a sustainable solution.

Becoming aware of your cash flow through a budget, maintaining an adequate emergency fund and diversifying your income are all strategies that can help you to manage an uneven income. 

Working with a trained professional can alleviate time, aptitude and ability constraints, keeping you and your family on track to meet your goals.