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How to Pay Off Debt When You Have a Variable Income

Budgeting TIps

Let’s face it — budgeting when you have regular income is straightforward. You have a steady paycheck coming in at least bi-weekly that you can allocate to your bills, savings, debt, and investments.

Variable income is another animal. Payments come in at different times and they can even come in months late. It can be harder to aggressively pay off debt but not impossible. In this post, we’ll discuss a few ways you can pay debt off when you work for yourself.

I do want to mention that before putting all of your money to debt you should have a rainy day savings fund. Put at least a month worth of bills in savings to avoid falling back on more debt when an emergency happens. With that said, here’s how to prioritize your debt this year:

Consider a Balance Transfer or Refinance

The first thing to do is find out if you can save money on fees and interest on your current debt. A balance transfer from your present credit cards to a new card that has an introductory 0% interest rate deal for at least 6- to 12-months can save you quite a bit of money.

Credit card companies offer these deals for a set period of time to attract new account holders. Pay off your balance using a transfer within the allotted time and you’re essentially borrowing money for free. You can also try to negotiate a lower interest rate on your current cards.

Do some shopping around for a refinance if you have loans as well. A refinance can decrease your interest rate, lower your monthly payment, or even shorten your loan term. Of course, these three factors can be a great help when you’re repaying debt with variable income.

Ruthlessly Cut Your Business (and Personal) Expenses

Your business expenses impact the monthly “paycheck” you get from your business. Check your business expenses to free up some more money for your debt plan.

Take a second look at your personal budget as well. Creating a bare-bones budget can help you focus more money on debt and emergency savings so you can avoid relying on debt in the future.

A bare-bones budget is when you focus on the necessities only. It’s not a budget you’ll want to keep for the long haul because it can lead to budget fatigue. Budget fatigue is when you’re so sick of cutting back on all luxuries that your attitude about money becomes negative or you decide to splurge. But, for a short period of time, ruthlessly cutting back on business and living expenses can be just the thing you need to clear up your debt balances.

Bite off a Little More than You Usually Chew

Think about adding to your client roster to increase the amount of money you’re putting towards debt. I usually work with up to 5 to 6 clients simultaneously. It’s enough to keep me financially stable and not working crazy hours. If you’re in the same position where you have room to take on more work, consider hustling harder for a few months to crush your debt.

Final Word

Paying off debt is something you may have become an expert at when you earned a full-time, stable income. Learning how to budget with a variable income is an entirely new beast. The good news is that it is doable.

Cut back on all of your expenses to create an emergency fund. This will help you avoid having to rely on debt when payments don’t come in on time. After you have a cushion, prioritize your debt by shopping for affordable debt solutions, reducing operating expenses, and taking on more work.

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