Freelancers, the self-employed and those who depend on tips or commissions can have a great-paying month or a bad one which leaves us vulnerable. The best advise is to plan ahead as much as possible. Here are some tips for managing money when paycheck fluctuates: Step 1 - Build an emergency fund. First, fortify your finances to make sure you are prepared for a disaster. Even before paying down high-interest credit card debt or chipping away at student loans. If you have been able to save a little cash over the past year, your emergency fund should be your top priority. The rule of thumb is we should save nine months's worth of living and health care expenses in an emergency fund. If Covid-19 in 2020 has taught us anything, it's the importance of saving an emergency fund. It's more than the standard recommendation of three to six months' worth to cover expenses in a month we don't get paid as much. One program to help jump-start a savings habit is saverlife.org. Step 2 - Tackle high-interest debt. This is not the most glamorous path but it is the one that will offer by far the highest returns. Consider paying down or off any extra money toward debt with interest of around 6% or higher. Carrying high-interest debt makes the magic of compound interest work against you. The more money you owe, the more interest you owe.
Step 3 - Budget what you spend. Irregular income means that we must live below our means. Because we don't know our income for a given month, we must construct our budget around baseline/necessity spending such as housing, utilities, food, insurance and transportation and a monthly amount for annual bills such as property taxes. As app that tracts spending such as Mint or Personal Capital can help us estimate. Step 4 - Create a steady paycheck by setting up separate accounts for deposits and spending. Deposit paychecks into one account and pay yourself a "salary" that covers expenses.