Managing Money On A Variable Income – Guest Post

The following is a guest post by DebtKid, who writes about his journey to get out of debt, and achieve financial stability.
He also runs the Money Hackers blog network.

Getting out of debt has become the new mission for many consumers. Heck, It's my number one personal mission! Now that the days of easy credit and lucrative terms are history, many consumers are facing the harsh reality that their paycheck cannot support the lifestyle they have become accustomed to living. Regardless of all the advice about living within your means and not using credit as an extension of your income, millions of consumers have been doing just that for years.

With credit limits slashed and banks refusing loans the only way to get out of this mess is to eliminate your debt and start over with a budget based on your actual earnings. What happens when you don't know how much money you will be making?

Some people think it is a waste of time to create a budget when you don't know exactly how much money you will be making, however these are the individuals who need a budget the most. Here are a few tips to help create a workable budget which will allow room for savings and debt elimination while living on a variable income.

• Determine earnings – Even for those who do not have a set pay amount, it is possible to look back over the past 12 months and determine an “average” dollar figure in terms of income. Whether you work on commission or are self employed with periods up feast and famine, you should be able to pinpoint a low earning amount to start your budget. If you base your budget on your lowest earning period, when you make more money it will be “extra” versus finding yourself short each month.
• Pay necessities first – It is especially important for individuals who have unpredictable earnings to budget for necessities first before spending money on non-essentials. Necessities are the things needed for survival (or at least survival in relative comfort) such as rent/mortgage, food and utilities.
• Think long term – Living on a variable income requires a person to think beyond this month's financial obligations. In order to make it through the lean times, you must use money from the “good” times to grow your savings and eliminate any high interest debt. This is true for all individuals however especially important when you do not know for certain how much money you will make from one month to the next. It may be tempting to use a big paycheck to splurge on luxuries, however this will only increase your financial problems in the long run. Once your necessities are covered most of your remaining income should be allocated toward savings to ease the burden in future months when money is tight.

Living on a fixed income affords a certain security in that you know what to expect each payday to create a workable budget. The same can be true for individuals living on a variable income if they take the time and put forth the effort to create a realistic budget.

By eliminating debt you reduce the number of financial obligations which will instantly put more money back in your pocket. Building a well padded savings account also provides security when you face low earning periods. These simple steps help add some predictability
to an otherwise uncertain future.

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