Tips for managing your money when your income is variable

Managing your personal finances is something that just about everyone can improve on. As a freelancer, you not only have your personal finances to consider, you also have your business expenses and if you aren’t careful, they could start to blend together. When you add the inconsistency in income that comes with this type of career, you have a recipe for some chaotic finances.

To help avoid some of that chaos, check out these smart tips for managing the variable income that comes alongside freelancing.

Plan now for the foreseeable

There are a few things in life that you will always be able to count on: you will always hit every red light when you are late, your smoke detector will always run low on batteries at 3 a.m., and your taxes will always sneak up on you. While we can’t do much for the first two, we can definitely help with the unique tax challenges you face as a freelancer. Start planning for your quarterly taxes as soon as possible and open supplemental savings accounts for specific payments. (You might as well earn interest while you’re saving for those payments.) Keeping large, predictable expenses separate from everything else will help keep you organized and on track.

As a freelancer, you know better than anyone about the challenges of dealing with inconsistent income, and you’re already well aware of the importance of saving during feast times to carry you through the famine. Supplemental savings accounts can help you take your savings to the next level. Create one account to set aside money for lean months, another for business expenses, and one for your personal savings. This “envelope” approach to savings allows you to have multiple savings accounts, each with a specific purpose, while keeping your personal and professional finances separate.

Have a good backup plan

It’s easy to plan for bumps in the road when you see them coming from a mile away. But what about those unexpected bumps? When your computer crashes or you lose a phone as a full-time employee, there is a system in place to get those items replaced. The freedom that comes with freelancing doesn’t come with that safety net. You own all the equipment required for your job, from your phone to your car, and as you know, these things always tend to break down at the least opportune time.

These unexpected expenses are the reason that having a plan for credit and loans is just as important as savings. Having a credit line that is sufficient for your needs outside of normal savings will be a lifesaver for these unpredictable bumps. With your credit cards playing such an important role in your business, doing research to find the rates and rewards that work for your needs is essential. Talk to your financial institution about unsecured loans before you need one. This is also your chance to shop around to find the best options for your future needs – and it will give you the opportunity to avoid paying unnecessary fees that can eat into your income. Having a plan in place and not needing it is always better than needing a plan and not having one.

Consider your technology stack

Freelancers know how vital their technology stack is to their business. Being able to determine what components you need and building a stack that works best for you is one of the great benefits of being a freelancer. Some important but often overlooked components to your technology stack are the financial tools you need to be successful.

Documenting and tracking income are challenges every freelancer deals with, which is why your accounting and banking technologies are such key components to your technology stack. When choosing banking technology, you need to look at what is most important to you. If you are on the move often, consider mobile and online banking capabilities (and take a look at mobile app reviews). If you need frequent access to ATMs, make sure your financial institution is meeting your needs with a large ATM network or ATM fee rebates. Lastly, look at online personal finance tools like Mint, Quicken, Personal Capital, or EveryDollar to help strengthen your grasp on your finances. When your finances inform so many decisions both personally and professionally, it’s crucial for your financial tools to be as tailored to you as the rest of your technology stack.

Joe Evans is a Marketing Acquisition Specialist at Alliant.