We can’t change the fact that you don’t know exactly when or how much money you’ll bring in this month, but we can teach you to be in total control of the money you do have right now, and stress a little less about it. This eight-part series will teach you exactly how to budget successfully and make your money stretch, unpredictable income and all.
Everyone needs a budget, but if you are looking at a reduced (or drastically reduced) income, you need one the most.
A budget helps you take care of your most important needs, regardless of what comes in this month or next month.
Today, in the second installment of our eight-part series on budgeting when you don’t know when you’re going to get paid again, we’re going to talk about how to prioritize the money you have, even if your next payday doesn’t look like it used to.
Note: if you qualify for unemployment, be sure to apply for those benefits. They roll out a safety net and provide regular money coming in. With the passage of the CARES act, unemployment benefits got a noteworthy boost that will directly benefit your bank account. Learn more about benefits…
“Can I Afford This?”
When it comes right down to it, one point of your stress likely revolves around a question that everyone asks themselves: Can I afford this? It’s the answer to this question that feels so elusive.
When you’re bringing in money, it is tempting to feel like, “Of course! I’ll take two!”
But when you’re not, you are stressed. You feel stuck and paralyzed out of fear. Speaking of fear, your bills! It feels like you’re just guessing (you actually are just guessing!) and the guessing actually costs money.
Here’s the big idea: You don’t have to have regular income for you to be in total control of your finances. Did you catch that? You can be just as much in control of your money with unpredictable income than you can be with predictable income. Mind blown yet? Let’s keep going.
The first step toward answering the question of what you can afford actually begins with another question: What does this money need to do before I am paid again?
What Does This Money Need To Do Before I Get Paid Again?
Get comfortable with this question. It’s your new best friend. Chances are your first response will be very practical: You’ve got to pay your rent and you’ve got to eat. You’ve got to keep the lights on and pay your phone bill. And internet. You need internet.
Taking care of these expenses isn’t the fun or sexy part of budgeting, but these expenses have to get nailed down first, and chances are they’re coming due pretty soon. That’s why they’re immediate obligations, and there are two reasons why you need to protect the funds to cover these immediate obligations right now.
First, you can’t go hungry, and you can’t have the lights turned off. These are essentials.
The second reason is deeper and more important in the long run. Worrying about these immediate obligations is taking up way too much head space. You may not realize how stressed you are about money, because it’s all you’ve ever known. But if you don’t know with certainty that next month’s rent is covered, it’s probably weighing heavy on your nerves.
Don’t Underestimate the Drag of Money Stress
Every little bit of stress about your electric bill is a bit less space to try to find the silver linings: this time with your family has its sweet moments, the forced slow is probably a good change from your former all-out-sprint pace of life.
And that’s what makes budgeting so critical for anyone with an unpredictable (or currently non-existent) stream of income. Yes, everyone needs to budget, but with job loss or income reduction, financial stress clouds your thinking and impacts your decision-making to a larger degree. It gets in your way like a five-foot hurdle instead of a speed bump in the pavement.
Give Every Dollar a Job
There is one simple habit that can reduce this anxiety: Give every dollar a job.
Look at your bank balance right now. Don’t think about the money you are expecting, just what you have right now. Ask yourself, “What does this money need to do before I’m paid again?”
How many dollars need to pay that electric bill? Write it down. How many need the job of stocking your refrigerator? Write it down. You may suddenly realize that pile of money is smaller–or bigger–than you thought it. But by answering this simple question, by committing it to paper (literally or digitally), you’ve started to take control. You’re already more prepared to answer the ever-present question, “Can I afford this?”
Mapping out a plan further into the future (to next week, to next month) will increase your sense of control. The more control, the less stress. Control is the goal.
Next up, Part 3: The Dangers of Forecasting With Money You Don’t Have Yet
New to budgeting? Start today with a free 34-day trial of You Need a Budget. We’ve helped folks navigate job loss, furlough, and income reduction for a decade and they’ve come out on the other side with more control than ever before. What have you got to lose?