It’s no secret that when you run your own business you must deal with variable income – at least for some time. Quite frankly, it’s the bane of our existence as business owners. That and SE taxes.
To make matters worse, sometimes life sideswipes you and leaves you feeling kind of broke. I made an insane amount of money in July, good money in August and then lost two weeks of work in September due to a hurricane. Two weeks after that I found myself needing to unexpectedly replace my MacBook and then a bunch of annual business expenses hit my credit card at once. This is enough to drive you mad when you have variable income.
Now, the good news is I am earning more money than ever. I also have a nice savings cushion that I’ve been working on for a very long time. Therefore, I’m not in dire straits or anything. The problem is my budget is totally thrown off for the time being. Fortunately, automating my finances has actually come to the rescue.
I’ve actually doubled my monthly retirement contributions.
Despite all the financial craziness in my life lately, I recently noticed that I managed to double my monthly retirement contributions. In addition to a Roth IRA, I opened up an SEP IRA to get some tax benefits. I simply automated the contribution and forgot all about it.
Lo and behold, I’ve actually saved more for retirement even though my budget is completely out of whack. All of this is thanks to the automatic contributions I have set up.
I’m still saving money thanks to smartphone apps.
As a personal finance blogger, I’m always testing different smartphone apps that are meant to help people budget and save money. I currently have three running at the same time.
That means a) I have automatic minimum savings I have set and b) a lot of my spare change is going straight into savings. To make things more interesting, when one app withdraws money from my bank account, another app thinks it’s an expense. That means it sees it as an opportunity to round up to the nearest dollar and save the difference. It’s like I’m getting triple the savings for the same amount of effort.
The end result is I have a few hundred dollars sitting in savings that I didn’t even know about. Out of sight, out of mind. And again, it was totally painless.
As such, I highly recommend smartphone apps for people with variable income. It makes it easy to save without worrying so much about the freelance rollercoaster.
I pay for things automatically with a credit card that gives me cash back.
When used correctly, credit cards are great for managing variable income. I pay for nearly all of my business and personal expenses with a credit card for two main reasons:
- My bills are paid while I wait for client payments to clear. Then I just make one big payment to my credit card.
- I get cash back which I then use for savings, to lower my credit card bill or for free travel.
Of course, you need to be able to handle credit cards. This does require a lot of discipline to not get yourself into debt. I’m personally not a natural spender and I pay the cards off in full each month.
At the end of the day, automating your finances is a great way to make sure you’re still handling your obligations even when you have variable income. Eventually, you’ll get a better handle on revenue versus profit, but until then this is a good place to start.