Income Fluctuations do not Equal Debt

A common challenge that many people face while attempting to establish a budget is income fluctuation. This occurs when an individual. s income varies greatly from month to month. Irregular incomes are very common for the self employed and for people with occupations such as sales, and construction. This presents a unique challenge in creating a budget that can be adhered to each and every month. Many people fall into the trap of spending excess money on the good months and then resorting to credit on the slow months. The problem with this method is that often times the credit is not paid off when the funds are available. Each down month results in a higher accumulation of debt as individuals fall into a vicious financial cycle. However, it does not have to be this way. There is an effective method for people with irregular incomes to create a budget.

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• Write down a list of all of your annual expenses. These would include monthly expenses as well as those that might occur at odd intervals. Make sure to allocate money for "non bill" items such as Christmas gifts, vacations and savings.
• Divide the total amount of expenses by 12. This will give you a pretty good idea of how much money you will need on a monthly basis.
• Save surplus money. On months where you make more than the needed amount you may be tempted to spend the difference. Resist that temptation and place the extra funds in a safe place. (a savings account or an envelope)
• Use surplus on slow months. When you encounter a month where the incoming funds are less than the budgeted expenses you can utilize the surplus money fund.
• Cut expenses if necessary. If it becomes obvious that the annual expenses are going to exceed the annual income then it becomes necessary to trim your expenses.

By following these simple procedures an individual can create a simple workable budget. The next challenge is disciplining yourself to stick to your newly created financial plan. Consistently doing so can bring about amazing results, such as, lowered debts, less stress, and financial freedom.

Mark Carney is a professional consultant with First American Debt Consolidation and Loans, a debt consolidation service specializing in financial education, credit counseling, and debt management services nationwide.