How to budget for an irregular income

I've been a full-time professional blogger for more than a year now. It has been a fantastic experience, a sort of dream come true. But blogging for dollars is not without its drawbacks. As I've shared before, I feel socially isolated. I spend most of my time in this office, writing about money.

Also, the income can be irregular. For some bloggers, it is very irregular. One month you might have record earnings — and the next you might experience your own personal financial crisis. Bloggers aren't the only folks who struggle with the fluctuating incomes, of course. Many self-employed people face the same issue, as do those whose pay is tied to commission.

Creating a budget when your income fluctuates can be a frustrating experience. I am sure that each of us finds our own ways to cope. Today, I want to share the method that I've developed.

Projecting Income

Most articles I've read on this subject suggest basing your budget on your average monthly income from the past 12 (or six or three) months, but I don't recommend that unless your income has wild swings — $12,000 one month and $0 the next. As this past year has demonstrated, incomes can and do decline. A prolonged decline wreaks havoc with the “average income” budgeting method.

When I project my cash flow, I base it on my minimum monthly income from the past 12 months. Using my minimum monthly income instead of my average monthly income gives me a safety buffer. And when you have an irregular income, a safety buffer is vital.

Note: If your income is variable, but you know that you will always make at least $X,XXX, then it makes sense to base your budget on $X,XXX. Anything you earn above this amount is gravy.

A Hypothetical Example

For the sake of illustration, I constructed a hypothetical example of the monthly income a freelance designer might have earned in 2008:

Hypothetical 2008 income

The “actual” column shows the designer's actual income by month. The “average” column shows the average for the entire year. Using the standard advice, this designer would then construct her 2009 budget based on the average monthly income from 2008. Her 2009 budget would be $3,891.67 per month. But what if her income declined in 2009, as has happened to many freelancers? Here is a plausible scenario:

Hypothetical 2009 income

In this instance, the designer's average monthly income for 2009 was $3,600, or nearly $300 less than she budgeted. And because her first few months were fantastic, she might have been tempted to splurge beyond her budget. That would have been a mistake. If, instead, she had constructed a budget based on her lowest month in 2008, she would have done okay.

 

Now, obviously I fabricated these numbers out of thin air in order to make a point. But based on recent conversations with a variety of people who earn irregular income (bloggers, designers, contractors, entrepreneurs), many folks are facing this sort of situation in 2009. Their incomes have dropped, and their budgets weren't ready to cope with this.

Building a Budget

Projecting cash flow is only part of the battle. After finding a basis for my budget, I followed a simple system to manage my money. I recommend using two different bank accounts to make this work:

  • The first is your “business” account (without quotes for those of you who actually own businesses), which is where you deposit all of your income. My business account is a high-yield savings account with ING Direct. (You might use FNBO Direct or some other bank. Just choose something with a high interest rate.)
  • The second is your personal account, and it is from this that you will pay your ongoing expenses. There is no need to open a new account if you already have one that will work. I just use my existing credit union checking account.

Every month as you earn income, receive it (and leave it) in your business account. This is where you accumulate your cash. Because it's in a high-yield account, it earns interest as it waits for you to use it.

From this money, pay yourself as if you were an employee. Your monthly salary is whatever you calculated as your monthly budget, your minimum monthly income from the past 12 months. On a set date each month, write yourself a paycheck. Leave the rest of the money in your business account. (Here's more on the “virtual employer” concept.)

At I've Paid for This Twice Already, PT writes that “the key to budgeting with irregular income [is to] make it mimic regular income as much as possible.” I agree.

At the end of each year, three things happen.

  • First, you reset your salary. Based on the previous year's numbers, your income might increase — or it might decrease.
  • Next, you use the “extra” money you have been accumulating in your business account to pay taxes. I could write an entire article on budgeting for taxes with an irregular income, but for now let's just note that it is very important that you remember to account for them, especially if nobody else is withholding them from your paycheck.
  • Finally, if you have anything left after paying taxes, you pull this money out of the business account as personal income. It is, in essence, a year-end bonus. You can use it for whatever you see fit: debt reduction, long-term savings, a Mini Cooper.

Reading through this, my system seems complex. It's not. It is actually very easy. To summarize: I base my budget on my lowest monthly income from the previous year. When money comes in, it sits in a high-yield savings account. Each month, I write myself a paycheck based on my budgeted amount. The rest of the money is saved to pay taxes. If there's any left over at the end of the year, I get a bonus.

Note: The first year is difficult. You generally don't have the ability to base your budget on averages or on the lowest income from the last 12 months. (I was able to do this because I'd been earning money before I quit to blog full-time.) Instead, you'll have to use some other method to project your income. Whatever you do, remember: It is easier to deal with a budget surplus than it is to deal with a budget deficit!

Tips and Tricks

There are few other things that make living with an irregular income go more smoothly. The following tips and tricks build on the core personal finance skills we discuss often here at Get Rich Slowly:

  • Establish a foundation of thrift. The number one thing that helped me cope with an irregular income was adopting a lifestyle of thrift. I took steps to slash my spending. I decreased my recurring monthly expenses. I found cheap or free alternatives to the things I used to spend money on (Hulu instead of cable television, the public library instead of the bookstore, etc.).
  • Prioritize spending. Many of the budgeting guides I've read suggest creating a list of prioritized expenses. Financial guru Dave Ramsey, for example, recommends listing all of your expenses in order of importance. (“Importance, not urgency,” he says.) When you get paid, start at the top of the list and work down. This is an excellent method for those who are struggling to make ends meet.
  • Build a buffer of savings. Before I quit my “real” job to become a full-time blogger, I began to set aside a large sum of money as an emergency fund. I figured that if my income dropped below the minimum I needed to get by, I could tap the emergency fund to provide supplemental cash. With luck, I'd be able to ride out any rocky storms. (I've been fortunate to not have to do this.) When you have an irregular income, the bigger your emergency savings, the better.
  • Tap your business account only as needed. As money accumulates in your business account, you will be tempted to draw from this pool for fun and games. Don't do it. Remind yourself that this money is for taxes — and for your monthly salary.
  • Resist lifestyle inflation — especially during the good months. Lynnae at Being Frugal writes: “One of the biggest downfalls of having a variable income is the tendency to overspend on good months. Believe me, I understand. Your money is stretched to the limits in the lean months, so on a good month, you're tempted to spend a little bit more on fun stuff. But when the next lean month comes, there's no extra money left to help ride it out.”
  • If possible, live off just one income. If you have an irregular income but you have a partner who makes steady money, explore the possibility of living solely on her income. Use your partner's money to meet the necessities, and use yours to pay for savings and extras. This isn't an option for most people; but if you can manage it, it is a great way to budget.

Do you have irregular income? If so, how do you budget for the fluctuations? Can you offer any additional tips? I am especially interested in tips for those who are just getting started with self-employment or variable incomes.

More about...Budgeting, Planning, Side Hustles

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simon @ shrewdcookie.com
simon @ shrewdcookie.com
11 years ago

Great article,

I am in the same situation in that I have an irregular income – I plan my budget on a rolling 3 month basis.

Here is an article I wrote which others might find interesting.

http://www.shrewdcookie.com/financial-planning/cashflow-forecasting-planning-income-and-expenditure

Brenda
Brenda
11 years ago

My irregular income (as a freelance designer / part-time-retail worker) is highly irregular, but all on the low end. One month I may make $500 (usually the minimum) and other months I may make $2000 (the extreme rare maximum). Usually I average around $600-$800 a month. I have a very minimal budget that only includes the bare necessities: rent, utilities, gas, food, medication. This budget is around $800. Most months, I can just *barely* make just enough to cover it. On the few months where I make more, I save all the excess. Then, on the few months where I… Read more »

SJ
SJ
11 years ago

My contract work is also extremely irregular. I can go months at zero (no work), months at 6K and months at $12K (very long days/weeks, traveling), with zero warning as to when the changes occur, and my wife is a SAHM. I have migrated to this kind of 2 account system (what I call my income account versus my expense account). I can’t really use a minimum number for the “paycheck” b/c of the months at zero, but I defintely don’t spend my average number either. Truthfully, we have figured out what number we are “living comfortably” with (turned out… Read more »

Chiot's Run
Chiot's Run
11 years ago

Mr Chiots and I have an irregular income since we own our own business and we make most of our money 8 months out of the year. We have actually set a salary for ourselves and we transfer that money in each month and we leave the rest to accumulate. At the end of the year (or when our busy season starts and money is coming in again) we transfer excess to savings. This way we’ve been able to built up a personal emergency fund as well as a business emergency fund to cover expenses for 12 months. Migrating to… Read more »

Tyler@FrugallyGreen
11 years ago

JD,

I really appreciate the hands on “how-to” approach to this article. As I continue to grow my little side gig, I am on the lookout for ways to improve budgeting and admin tasks.

While I can’t offer any advice here since I’m just starting out, I am very glad you took the time to write something like this for us.

Lonnie
Lonnie
11 years ago

Thanks for this article. I have the all important tax question: My partner just started a part-time job that required her to fill out a 1099. Right now, she will earn a minimum of $360/week and we want to start a budget off of that. Our major concern is come tax time, what will be required of her to pay in taxes. What kind of percentage should we be budgeting per week for the tax bill at the end of the year?

J.D.
J.D.
11 years ago

@Lonnie (#6) There’s no one right way to answer “how much should I save for taxes?” It depends on a lot of variables. I always say that the best solution is to consult a tax professional, such as a CPA. For myself, I’ve adopted a rule of thumb. I save half of what I earn for taxes. I know that a couple of other pro bloggers do the same. This *way* overestimates how much I’ll actually need, but again, I’d rather have a budget surplus than a deficit. But what if my income was really close to my budget? Setting… Read more »

ABCs of Investing
ABCs of Investing
11 years ago

I hadn’t thought about this issue before.

I think the key is to pick some sort of percentage of your expected income to budget on. Using the lowest month is probably ok but what if you had one month that was just horrible? Basing your budget on that amount might not be realistic.

Perhaps a percentage of the average monthly income from the last 12 months is a way to do it. ie 60%.

RB @ RichBy30RetireBy40
RB @ RichBy30RetireBy40
11 years ago

JD – Thnx for sharing. I have several different sources of irregular income besides my main work income. The passive income of rental property is generally regular, and I always make a spread of X amount which i either uses to pay more down on the rental property principal, or just save in a SEPARATE savings account just for “rental property emergencies. I also have a vacation property in Lake Tahoe which has seasonal income: Very high in the winter and summer, very low in May, Oct, Nov. and the first half of December. The key is to save any… Read more »

Lisa
Lisa
11 years ago

I am self-employed, and I do basically what you outlined here, with two major differences. 1. I set aside 35% of my earnings into a SEPARATE account for taxes. That way I always have enough for estimated taxes, with that “bonus” you mentioned at the end of the tax year, but the money is out of sight, out of mind. 2. I pay several subcontractors who help me with my business, so I always keep a several-thousand-dollar cushion in my “earnings” account to pay them. I pay them from the “earnings” account rather than my personal-expenses account because those payments… Read more »

Adrianne
Adrianne
11 years ago

As someone who used to wait tables – this is also great advice for anyone who works in the restaurant biz. Sad to say, but I wish I had read this when I was waiting tables and bartending. At one point I was very good about letting the money sit, but walking away with all that instant take home pay, definitely a lot of money was wasted. Hopefully some service staff will read this and take it as good advice. With a little tweaking to account for the constant influx of cash this is a wonderful system and most waitstaff… Read more »

Lynnae
Lynnae
11 years ago

My husband and I have had an irregular income the entire 14 years we’ve been married. First, it was due to his sales jobs, and after he got out of sales, I was earning an income from blogging. So we have no idea what it’s like to have a regular income to count on.

Your advice is spot on! Thanks for sharing it. It took me years to figure out how to budget for an irregular income, so I hope this post helps someone just starting out.

And thanks for including a link to my article!

Blogging Banks
Blogging Banks
11 years ago

I actually do somethign different that what your do..just slightly though..
Instead of looking at my income which fluctuates a lot, I look at my expenses. I use my highest month by regular expenses as the base for my “salary” to myself and then go on from there. I typically spend $1000 on average each month with my highest month being at $1500. So if I made $24K/year, I would keep paying myself $1500/month, and putting any surplus in an emergency fund ( up to 12 months). The rest is then invested in stocks/fixed income.

Jon at Diversified Focus
Jon at Diversified Focus
11 years ago

Thanks for the explanation- feel that too few if any have covered this topic and I’m in a similar situation from short term investments. It really is true- when it’s a feast period the temptation to inflate lifestyle is very hard to resist but then comes back to bite you during periods of less.

Marcia
Marcia
11 years ago

Thank you for this post. Budgeting on an irregular income is something I’ve struggled with for years, especially as much my work historically has been project-based and starting up a new project can often take up a lot of financial resources. I’m shifting the kind of work I do now, and this formula will work really well for how my income will be coming in.

Sarah
Sarah
11 years ago

Because of “flat rate” we have an irregular income for many years. We use a strict budget I call the “24 plan”. I figure all fixed expenses (yearly insurances, prop. taxes, utilities, house payments, savings and yes Christmas and holiday expeneses, etc.) and divide by 24. (two paydays a month). Then I save on a spread sheet for each category even though its a lump sum in checking. When the expense is due, the money is there. The KEY its not extra just because its sitting there and figure your income as minimal average! If our paydays are bigger than… Read more »

Eden
Eden
11 years ago

Great analysis. I was a full-time freelancer about five years ago and I managed my money very badly. Ultimately, that was part of what lead me to go back to working for an employer. Now that I’m figuring out how to manage my money again, I think the freelance life will work for me when I try it again.

Rose Fox
Rose Fox
11 years ago

I’ve been a freelance writer for three years now, and my monthly income has fluctuated wildly in that time, from $0 to $11,531. My average monthly income is $2400, but that doesn’t give enough information to budget on, because some of the variation is seasonal: there’s always a drop in February/March/April, for example, because there’s always a drop in work around December/January and my clients take between 30 and 90 days to pay. I have a salaried part-time job that gives me regular income, but that plus my partner’s unemployment insurance (or his income, when he’s working) isn’t quite enough… Read more »

Khürt
Khürt
11 years ago

@Lonnie, your tax situation depends on how you’ve structured your business; sole-proprietorship (you and your business are the same entity) or corporation. Originally when I was a freelancer (USA) I took work as a W-2 employee of an agency. They paid me as any employer would, taking out taxes etc. Once I incorporated (in the US, you can do a C-Corp, LLP, LLC etc) I used a payroll service that was responsible for making the payroll ( I was those employee ) and submitting all taxes etc. I hired an accountant to do the corporate taxes and filed my own… Read more »

Rachel
Rachel
11 years ago

Thank you for this post. As someone beginning to freelance–and preparing to transition out of a job with a steady income–this was a well-timed article for me.

In fact, I can see this general system working even for someone with a steady income (i.e. working for me right now, not just when my steady income goes away!). By having my salary deposited directly into a savings account, I could pay myself a smaller monthly salary out of that account while automatically building my savings! It seems like a good idea for everyone.

RB @ Richby30Retireby40
RB @ Richby30Retireby40
11 years ago

BTW, can you full time independs/freelancers share with us what you guys do for health care?

Thnx!

RB

Rich By 30 Retire By 40

Sara
Sara
11 years ago

I have irregular income because the amount of overtime I work varies. Since I have a minimum monthly income (working 40 hours per week), I budget based on the that, and if I earn more, I just have more money going into savings. I’ve worked a ton of overtime this year and got a nice bonus, which will add about 50% of my base salary to my earnings this year. My problem is that, even though I have all this “extra” money over and above what I’ve budgeted (which means I’ve built up a huge amount of savings, not even… Read more »

J.D.
J.D.
11 years ago

@RB (#21)
The most effective way of obtaining health insurance when you don’t have a traditional job is to have a partner who can provide it for you. This isn’t practical in every case, though.

You may want to check out this guest post on how to find affordable health insurance when you’re on your own.

Rob Bennett
Rob Bennett
11 years ago

I think it’s a good idea to have two budgets — an expansive budget for good times and a tighter budget for when things are tight. Health insurance would be the same in both budgets. Amounts spend on vacations and new furniture and new cars would not be.

The second budget should be prepared before before the rough times come. The cutbacks should not come as a shock. The should be expected, something incorporated into one’s long-term plan.

Down economic times happen. We should cease being amazed by them.

Rob

The Frugal New Yorker
The Frugal New Yorker
11 years ago

What a fantastic article, and timely too (for me)! I love the idea of banking all your income and then issuing yourself a bi-weekly paycheck; that makes so much sense. I’m starting to move into some freelance copyediting work, and while I’m not at the point where I need these suggestions yet, I will certainly be saving this article! Thanks, JD, and also thanks for some of your comments on taxes–I guess I’ll save about 37-40% of what I earn. Does anyone know of any blogs or webpages that discuss budgeting and saving for freelance taxes? About.com has an article… Read more »

Pat with Smart Passive Income
Pat with Smart Passive Income
11 years ago

J.D. – this is an excellent post. Thank you so much for obviously spending quite a bit of time to write it for us. I make anywhere between $8000 and $30k a month, so budgeting is really difficult for me. Of course, I don’t spend even close to that each month, so I am saving quite a bit – but the difficult part is determining how much to regularly save. This post, however – definitely helps. Question: do you think it’s smart to pull money from your business accounts and put that into your personal accounts as soon as you… Read more »

J.D.
J.D.
11 years ago

@Pat (#26) This is a great question. I think it’s largely dependent on your business. And here’s a little secret: I actually have an added layer that I didn’t describe in the article because it would just create unnecessary confusion. I have an actual business account that receives the money, but then I transfer it to a personal business account at the end of the month. Does that make sense? All of the stuff I described above is done with personal accounts, but there’s an initial actual business layer that things pass through first. If you’re worried about lawsuits, I… Read more »

Pat with Smart Passive Income
Pat with Smart Passive Income
11 years ago

@ J.D. (#27) Thanks for your prompt response. Oh, and I’ve only been reading your RSS feed for awhile, so this is the first time I’ve seen your new blog design. Well done! Anyways, while first reading this post, I was wondering if you did have a business account that you pass through first or not. I’m actually quite glad to see you’re doing it that way – and it’s the exact same thing I do. The business layer, or actual business account allows me to more easily write myself a check each month (actually – I print it out… Read more »

McKenna
McKenna
11 years ago

My contractor husband has an irregular income, and we have constructed our budget/accounts exactly like this. We developed this system on our own because it was easy and seemed to work, but I had no idea it was such a viable way to effectively manage a budget with irregular income. It’s nice to know that we’re doing things relatively “right.” This was fun to read! One thing we do that I don’t think JD does: We transfer the majority of my husband’s income into our personal checking account, but he keeps some of it in his business account to pay… Read more »

RB @ Richby30Retireby40
RB @ Richby30Retireby40
11 years ago

JD – Thanks for your link and tip on health care. That does sound like the smartest and cheapest way to go, getting on your spouse’s plan. However, I don’t think my spouse would allow me to “retire” alone, and she will want to join me 🙂

Pat – Wow, 8K-30K/month in passive income is inspirational! I have dreams of posting on a yacht in the French Riviera or on a secluded beach somewhere in 10 years.

Thanks for keeping the dream alive!

Best,

RB

Rich By 30 Retire By 40

Penny
Penny
11 years ago

Great post, one of the things that would scare me into not quitting my normal job (even if I was making enough money) would be the sudden stop in the plan. I’d be horribly afraid of chugging a long great, and then all of a sudden.. “opps!” no cash. “Reading through this, my system seems complex. It’s not. It’s actually very easy. To summarize: I base my budget on my lowest monthly income from the previous year.” A good move, I used to do this when I was gauging the value of items I would be selling. Taking into account… Read more »

Shara
Shara
11 years ago

It was pointed out, but this way of thinking is also good for people who work overtime on a regular basis. I have known a number of people who counted on their OT, and then hours were cut back. Or people who live like “National Lampoon’s Christmas Vacation” and spend their annual bonus before it’s in the bank. 2-5% of what I make is a non-base annual bonus, and another 5-10% is OT. Since OT can play havoc with taxes I Xfer it to a high yield savings account and I don’t do anything with it until after my taxes… Read more »

Tyler Karaszewski
Tyler Karaszewski
11 years ago

Man, I make so much money working from the beach that I don’t know what to do with it all, so thank you J.D. for giving me some good ideas. Just as an example, I made $1,000,000 last month. If you visit my website, http://www.spammysnakeoilsalesmen.com, you can buy a copy of my book that will tell you how to make as much as I do, because *obviously* everyone can get rich from home, if they just knew what genre of book to sell (which I tell you in my book). I also have a book on blogging about blogging tips… Read more »

Lilb
Lilb
11 years ago

What account do you use to pay your business expenses?

J.D.
J.D.
11 years ago

@Lilb (#34)
I always pay my business expenses from my business account and my personal expenses from my personal account. Never the twain shall meet.

Baker @ ManVsDebt
Baker @ ManVsDebt
11 years ago

Wow, this is a hard topic to wrap up completely, but you’ve done an awesome job. One strategy I used was to base our budget off of my income from last month. It requires you to get one month ahead, but ensures you never spend more than you made. Also, more recently, we’ve drastically cut our lifestyle to be able to live off of just 1 income (which happens to be regular). If you are a couple in this situation, you can use ALL of the irregular income for savings, paying down additional debt, traveling, etc… Obviously, this can’t be… Read more »

Steve
Steve
11 years ago

I am a freelance photographer/web designer/post production retoucher. I am less then a year out of college, so most of my income comes from assisting other photographers right now. For about 10 months now I have been budgeting like the above, taking in checks and payments into my LLC’s account and then paying myself at the end of the month. In the beginning I took a look at what I wanted to be spending on different things, such as rent, bills, gasoline, etc., and built a budget off of that. I came up with $1150, and that is what I… Read more »

AJ
AJ
11 years ago

This was a helpful post. I hope I can get to a point where I can quit working and blog or be self employed full time.

Leah
Leah
11 years ago

Shouldn’t 1099ers be paying taxes quarterly, rather than at year-end? I don’t think the IRS’s penalties and interest are that high (though I haven’t investigated them), but why give them any more than you have to?

Actually, having said that, it might be interesting to compare the interest you could earn by paying quarterly taxes late vs. the fees the IRS would charge you. I’ll keep an eye out for that tax article!

Manisha Thakor
Manisha Thakor
11 years ago

Bravo! This should be required reading for anyone who is self-employed or has an irregular income. Managing cash flow, for both large corporations and self-employed individuals, is the key to navigating life’s speed bumps. Especially loved your point about avoiding “lifestyle inflation” – spot on.

J.D.
J.D.
11 years ago

Leah (#39) wrote: Shouldn’t 1099ers be paying taxes quarterly, rather than at year-end?

Yes, absolutely. Good point. From my experience, however, quarterly taxes are only a rough approximation. They either estimate too high — or too low. In any event, always keep enough in savings to cover your estimated tax liability.

McKenna
McKenna
11 years ago

Ah, JD, you answered my quasi-question that was written as a statement. I see you also pay your business expenses from your business account and reserve the personal account for personal expenses. Whew. Once again, it’s nice to know that we’re doing things “right.”

Again, great post. Looks like it’s helping a lot of people. Especially that guy with the snake oil. Gotta check him out!

Ian
Ian
11 years ago

Thanks, J.D. This is exactly what I want to read more about in Get Rich Slowly. I am beginning the path of an independent musician and music teacher, and I have been trying to figure out what steps to take to help keep my financial house in order.

Thanks.

Attagirl
Attagirl
11 years ago

I have a regular 9-5 type day job, but since you wrote about the ‘virtual employer’, I’ve been using this method. As someone else noted, this keeps the overtime and bonuses in savings – they don’t get spent without thought, like I used to do. In fact, my monthly savings has doubled because of this (such waste in the past). Thanks for the plan, it’s working great.

Lilb
Lilb
11 years ago

Can you explain your whole banking system?

Adrienne
Adrienne
11 years ago

One thing we do is an “Annual Budget” rather than a monthly one (this is good not only for variable income but also for variable expenses). We re-adjust every 6 months. Then I keep a large cushion in my checking account to cover the downs. I also over-save for taxes in a separate account. Once/yr I sweep the overage into a combination of checking, saving, investing. This keeps the month to month bill paying fairly smooth.

Toby
Toby
11 years ago

The one thing I would change if my income followed an irregular pattern is to budget based on “rolling 12 month minimum”, which would be the lowest month from the immediate last 12 months. The advantage with this method is that if your income is trending downwards due to industry/market conditions, your monthly budget immediately takes this into account. JD’s method would not do this, as the amount is only reset once per year. Eg. say your minimum monthly for 2008 was $3,000. In Jan 2009 your income is $2,800. A rolling 12 month minimum would be $2,800. But if… Read more »

Alan @ Saving For Serenity
Alan @ Saving For Serenity
11 years ago

Hey JD,

One question for you. When would you recommend opening a business bank account? When did you open yours?

Is it imperative that you open one as soon as you make your first freelance dollar, or is it necessary only when you are purely freelance?

LaToya Irby
LaToya Irby
11 years ago

I pretty much do what you described here. I base my budget on the minimum monthly income, but also use the average and maximum income as reference points. I pay myself from an account, as if I’m an employee, and leave the rest of the money in the account. If I should ever earn less than my current “minimum monthly income,” I’d make up the difference with the buffer that’s in my business account. Resisting lifestyle inflation is definitely something I have to pay attention to. I get comfortable in those “fat” months and I want to splurge. In the… Read more »

Aaron
Aaron
11 years ago

That’s a much more intricate plan than what I wrote you about, but that level of detail can really help sometimes.

I wholeheartedly recommend resisting lifestyle inflation. The extra savings can lead to more opportunities as they present themselves down the road.

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