Living the dream as your own boss? Don’t let it become a budgeting nightmare. Stay on top of things when you have a variable income.

When former cubicle-jockeys switch to a freelance career, it’s almost always in pursuit of one elusive goal: freedom.

But with that freedom comes uncertainty. Many newly self-employed individuals find themselves missing the income consistency that came with their old gig.

But variable income doesn’t have to mean a dubious financial situation. There are a few methods you can use to create the consistency you’re looking for. This allows for the kind of stability you’d enjoy at an office job.

Here’s how I manage my own variable income:

Calculate how much you need.

Living on a variable income is stressful if you’re also living in the dark. If you don’t know how much you need to survive, how can you know if you’re budgeting correctly?

Go through your spending and add up your necessary expenses, including rent, groceries, gas, utilities, debt payments and other bills.

Then divide that number by 75% to calculate your target income.

That will be the minimum you need to earn each month. Anything left over can be used for discretionary spending or saving.

Live on last month’s revenue.

While salaried individuals know how much they’re going to bring in every month, people living on a variable income have no clue.

A long-term client could take an extended vacation or an assignment might be delayed indefinitely. One of my favorite ways to combat this uncertainty is to live on last month’s invoices.

If you grossed $3,000 last month, then you can only spend $3,000 this month — even if you project to make $4,500 this month.

This budgeting philosophy is all about spending the money you have, not the money you think will have. After all, things can and will go wrong every month. The technique also eases your cash flow, since many freelancers don’t get paid until 30 days after they’ve submitted an invoice.

Save most of your surplus.

A friend of mine who worked in the dance industry once told me about a mentor who would go designer shopping every time she got a choreography gig. These jobs paid exceedingly more than teaching gigs and left her with more cash than she was used to.

Instead of saving that dough, she’d go shopping for name-brand purses and clothes. I was shocked when I heard that story, but not surprised. It’s human nature to go on a shopping spree when you land a big windfall. However, budgeting responsibly (especially on a variable income) is all about denying those urges.

It’s ok to celebrate a new client or big project as long as you’re tucking some of it away for a rainy day. Try to save between 70% and 80% of your surplus income and enjoy the rest responsibly.

Keep an emergency fund.

Everyone who works for themselves has a slow period where the work seems to dry up. You can plan ahead for these months by having a larger-than-normal emergency fund.

I keep a six-month emergency fund since my husband and I are both self-employed. Having half a year’s worth of expenses keeps us afloat during the off-season. It’s a good buffer to have and prevents me from picking up a McDonald’s application when the work starts to dwindle.

Multiply your baseline income by how many months you want to save for. Most people with variable income should have between six months and a year’s worth of bills saved in an emergency fund.

Make your expenses the same every month.

One of my favorite ways to regulate my finances has been budget billing for our utilities. Most gas, water, and electric companies allow you to pay the same amount every month instead of the amount you use.

Having budget billing has simplified my finances since I know our water bill will be static, no matter the season. I don’t have to worry about high gas statements in the winter or AC costs in the summer. Contact your energy company to see if they offer this service.

Look for other ways to normalize your bills so that you have the same expenses each month.

Save by percentage, not dollar amount.

Writer Jackie Lam of Cheapsters became a freelancer after she got laid off at her full-time gig. To make the transition smoother, she started saving a percentage of what’s left over after she’s paid the bills, instead of a specific dollar amount.

For example, instead of saving $200 a month for a vacation, she sets aside 5% of her budget. Using percentages makes it easier to hit her savings goals, even if she hasn’t had the most productive month.

In busy times, she might save more than $200, and during slowdowns she might only save $100. That percentage tends to average out over the year.

It’s a way to feel a little more secure and avoid feeling like a failure if you don’t hit a set dollar amount.

Be your own CEO.

If you really miss the stability of office life, consider paying yourself a salary. Once you’ve calculated your baseline, it’s simple enough to choose a stable wage to take going forward. Overage income can be applied to your savings, while consistently coming in under budget can be a warning sign that it’s time to take a pay cut.

This isn’t exactly the most efficient method listed, but it can take a lot of psychological weight off of planning your finances. It’s simple. Pay yourself a little less than you typically make and save the rest.

Do you live on a variable income? How do you make it work? What’s your favorite budgeting technique? Let us know in the #Adulting community on Facebook.

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Don’t let your work from home dream turn into a nightmare. Set up your home office space following sound principles and you’ll be much happier.

The best way to support Adulting.tv is to subscribe and leave us an honest review. Thank you!

An increasing number of people work from home today.

Even if you don’t own a home business, telecommuting is something that many companies are willing to allow — at least some of the time.

Whether you have a side gig, your own business, or you just work from home on occasion, a home office is a good investment in your career sanity.

Here’s how to set it all up.

Concepts

  • A look at why it’s so popular to work from home right now.
  • Some of the “must haves” when it comes to a home office.
  • How to decide on the right computer and software for your work from home needs.
  • The difference between running your own business and working from home for someone else.
  • Why you need a dedicated home office if you work from home regularly.
  • Tips for cutting down on distractions when you work from home.
  • How to get into “work mode” with your home office.
  • The reality that sometimes you need to get out of the home office and work elsewhere.

This week’s DO NOWS focus on getting your home office-ready. Make sure you look around your home to identify potential spots for a home office. Also, you need to create a realistic list of the items you need to create your work from home reality.

Our listener question touches on a difficult issue for many people who work from home: what to do when the kids are too distracting? It’s not always a popular solution, but the reality is that sometimes you need to hire child care — even when you work from home.

Become a Friend of Adulting

To get Adulting delivered directly to your device, subscribe using iTunes, Stitcher, Google Play, or your app of choice.

Join the Friends of Adulting! Please leave an honest review on iTunes. We would really appreciate the feedback!

Resources

Like what you’ve heard?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Tired of the soul-sucking 9-to-5 job? You can prepare to ditch it for good. Here’s how to plan your escape.

Less than a year ago, I quit my job.

I didn’t quit working. I just quit working for someone else. I feel as good today about that decision as the day I left.

The best part about quitting my traditional job was watching the cycle of emotions my friends and family went through after I told them I quit.

Their eyes opened wide when they heard the news. This was followed restrained winces, as they considered the loss of steady income, health, and insurance, security, two weeks of vacation a year. All those things we expect from a job.

Then, as if on cue, they’d drift into a daydream and pondered quitting their own jobs.

If you dream of a life of employer independence, you too can leave the 9-to-5. Here are five keys that helped me take that major step:

Sticking to what I know.

One of the main reasons people say they can’t quit their day job and start their own business is that they don’t know what to do. Don’t think too hard about it and get stuck in analysis paralysis. Stick with what you enjoy, are already doing, or are good at doing.

Listen. If the universe is pulling you in a certain direction, go.

My and my husband’s careers have been in finance. Despite this, when got together we had a combined total of $51,000 in credit card debt. We applied our theoretical and practical knowledge to pay off our debt and turn our net worth around.

We enjoy finance, investing, and financial planning. Because of our experiences and our desire to help others with their money, we’re using our personal and professional experiences as the foundation of our business.

We put ourselves out as writers, speakers, podcasters, and experts on personal finance and we’re now helping others and, in turn, growing a business that let me leave the 9-to-5 grind. David’s not far behind me.

We saved money.

Before I quit my W-2 job, we added an additional $10,000 to our existing emergency savings account.

We did this by cutting back on non-essential spending and putting it into our emergency savings account with no bells or whistles. We don’t have debit cards or checking writing on this account. We don’t connect it to other accounts for outgoing electronic funds transfers (EFT). This money is hard, though not impossible, to access. This reduces urges to spend this money on whims.

We’ve resumed some of the habits we used to pay off our $51,000 in credit card debt. This includes only buying groceries that are either on sale or for which we have coupons. We cook at home rather than dine out. Cardboardeaux has replaced Bordeaux because it’s cheaper per bottle and stores longer.

All of this is temporary and we know this is temporary. We can live frugally today to grow our business because we lived frugally yesterday to pay off our debt.

Hustling harder than ever.

Thomas Edison said, “Opportunity is missed by most people because it is dressed in overalls and looks like work.”

I used to think I worked hard at my W-2, but I worked just hard enough to keep my boss happy.

I’ve never worked so hard in my life as I am now on our business.

With each day, the 9-to-5 is getting smaller and smaller in the rearview mirror, but to say it’s been easy would be disingenuous.

There’s a meme of an iceberg I frequently share on Facebook. Ten percent of the iceberg is above water and represents the “overnight success” that people see. Ninety percent of the iceberg is below water and represents the work no one sees: waking up at 4:30 am, working until midnight, on weekends, and holidays.

There are times that I’ve questioned if this is worth it. When I hear about rush-hour traffic jams, friends stressed about their bosses and disappointment with nominal raises, I’m reminded that it is.

I prepped.

There were steps I took before I decided to actually leave the 9-to-5.

I researched and updated my health insurance, acquired life insurance, and created a plan to consolidate my employer-sponsored 401(k) with my personal broker.

We talked with our accountant about what my W-2 and 1099 employment status changes would mean for our personal income taxes. We created a week-to-week budget that accommodates our drop in regular income.

Being thorough and meticulous before I quit has made temporarily cutting our income in half a little easier.

I took the leap.

Finally, I took the leap. Many people struggle to make big and seemingly scary life changes because they’re waiting for the perfect time. There will never be a perfect time. As Voltaire said, “better is the enemy of the good.”

Many people struggle to make big and seemingly scary life changes because they’re waiting for the perfect time. There will never be a perfect time. As Voltaire said, “better is the enemy of the good.”

To be fair, I delayed my original termination date by 90 days because my employer asked me to complete a project on which my team was working. I considered delaying my termination again because the economy showed signs of weakness. The problem is we can always come up with reasons to stick with the safe and familiar.

Some people might say we should’ve saved more than that extra $10,000. Others might say I should’ve waited until after the last presidential election ended. Still more might say leaving, at all, was foolish.

Despite all the reasons I could’ve manufactured, I leaped and I don’t regret it.

If your dream is to leave the 9-to-5 behind, too, these five steps may help you. I challenge you to be thorough and meticulous before you take such a leap, but I also challenge you to not get paralyzed by fear or analysis.

As Zig Ziglar said, “If you can dream it, you can achieve it.”

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Do you want to work abroad and live your life from anywhere in the world? Sarah Li Cain shows how you can live this flexible lifestyle.

Once in a while, we present Adulting.tv LIVE! Subscribe on YouTube to hear about future events, and share your questions about or suggestions for our next discussions!

On today’s episode of Adulting.tv LIVE!, Harlan and Miranda are joined by Sarah Li Cain from High Fiving Dollars. Today we’ll discuss what it takes to travel beyond your home, see the world, and enjoy living and working outside of the United States.

Sarah Li Cain is a financial storyteller who weaves practical tips and strategies into her work so that those trying to change their money mindset can see themselves in the starring role. You can find her over at High Fiving Dollars where she answers readers questions or spilling her guts out on her latest money experiment.

Watch the video above or listed to just the audio by using the player below.

Hosted byHarlan Landes and Miranda Marquit
Produced byadulting.tv
Edited and mixed bySteven Flato
Music bybensound.com

Like what you’ve heard?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Trying to figure out what to sell online? An online sales business can change your lifestyle.

Once in a while, we present Adulting.tv LIVE! Subscribe on YouTube to hear about future events, and share your questions about or suggestions for our next discussions!

Today, Harlan and Miranda are joined by Steve Chou from My Wife Quit Her Job. On this episode of Adulting.tv LIVE! we will discuss finding the best product to start an e-commerce business. Selling products online can be a great way to earn a living.

Steve carries both a bachelors and a masters degree in electrical engineering from Stanford University. Despite majoring in electrical engineering, he spent a good portion of his graduate education studying entrepreneurship and the mechanics of running small businesses. He currently works for a startup company in the Silicon Valley.

Watch the video above or listen to just the audio by using the player below.

Hosted byHarlan Landes and Miranda Marquit
Produced byadulting.tv
Edited and mixed bySteven Flato
Music bybensound.com

Like what you’ve heard?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Time doesn’t just show up for free. If you want time for your side hustle, you have to make it.

I hear this all the time:

“I really want to start a side hustle, but I don’t have time.”

It’s true that some of us really don’t have time for side gigs. After all, we’re busy people. We have real jobs and families and a desire to, at some point, to live a little.

But you might be surprised at how much time you do have. Here are some strategies to use to make time for a side hustle:

Track your time use.

The first thing to do is track your time use.

When I feel like I am running out of time, I start tracking my time use. Usually, the problem is that I’ve let unimportant things creep into my life, or I get distracted.

Keep a diary of what you are doing, and how long you spend doing it. You might be surprised at the patterns that emerge.

According to the American Time Use Survey, adults spend close to three hours a day watching TV. I’m always surprised when I track my online activities and discover how much time I spend just surfing.

If you want to make time for a side hustle, start with how you’re using your time now to see where you might find a place to cut back on some of your unnecessary activities.

Schedule side hustle time.

So often, we don’t make time for a side hustle. Instead, we say we’ll do it when we have time. Just waiting to see if the time appears is a surefire strategy to ensure that you’ll never have time for a side hustle.

You’ll increase your chances of having time for a side gig if you actually schedule the time. Wake up a little earlier. Instead of watching TV for two hours in the evening, schedule an hour and a half to work on the side gig.

Think of where you can carve out time during the day to dedicate to your side hustle and schedule it into your day.

Use the weekend.

I know, I know. We all love our weekends. It’s a break from work. However, if you want to make time for a side hustle, you need to give something up.

You don’t have to use the whole weekend for your side hustle, but it can be a good time to get something done with your side gig.

When I have things I want to do, I try to work on them during Saturday morning. My son has his own extracurricular activity and it’s a perfect time for me to hit something hard while I don’t have other obligations.

Figure out what works best for you. Saturday morning? Sunday afternoon? Whatever. The weekend is the perfect time to … make time for a side hustle.

Schedule a workcation.

Consider your real job. Do you get time off for vacation? If you want to make time for a side hustle, you can kick it off with a workcation. Take a vacation with your day job, and use it to work on your side hustle.

When you don’t have to focus on your regular job, you have a little more time to work on a side gig.

Of course, you can’t be constantly taking time off to make time for your side hustle. However, you can get a lot of good value out of a bit of time off to really dig into the side hustle.

A workcation can also help when you aren’t taking time off your regular job. When my son sleeps over at a friend’s house, I sometimes book a room at a local hotel. That change of scene for one night and the next morning really helps me focus. There’s something about getting out of the routine that provides you with a chance to work on a side hustle.

It’s totally worth it to get a hotel room for one night if that helps you focus up.

Ask for help.

Do you have a support system? If so, ask for help. Sometimes, when I need a little more time to work on my projects, I get help from my parents, or from my sister, in taking my son for a couple hours while I really get down to it.

We help each other.

Look around to see if you have a support system that can help. You might even have a life partner who can help you out.

I know a couple who helps each other with these gigs. They saved up an emergency fund. Then, he kept working while she worked to make her side gig a full-time reality. After a while, she gained traction. However, she wouldn’t have had time for the side gig without the full buy-in of her partner. He helped make it possible for her first reduce her hours at work, and then quit altogether.

If you can get help from your support system, it’s a little easier to make time for a side hustle.

Bottom line.

We all have challenges. I know I don’t do as much as I would like in a lot of areas. However, part of that is because I don’t make time. Use one or all of these strategies, and you might be surprised to see that you have more time available than you thought.

Are you working on a side hustle? When do you work on it? What’s your best way to make it happen? Let us know in the #Adulting community on Facebook or leave a comment here.

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!

Just because everyone’s in love with entrepreneurship right now, it doesn’t mean you need to feel bad about your real job. There’s no shame in that game.

The only way to be truly free is to start your own business and quit the 9-to-5 grind.

Have you heard that before?

It’s become a common theme in recent years. In some circles, the idea that you must become an entrepreneur with the goal of quitting your traditional job is so prevalent that there’s a patina of shame attached to having a real job.

I love working from home. I wouldn’t give it up. I haven’t had a real job in more than a decade — and wouldn’t trade a second of it. But that doesn’t mean that my path is right for everyone.

Before you decide that you need to do everything in your power to build a business that allows you to escape the rat race, stop and think about whether or not it’s really the way for you to go.

If you decide a traditional career is the right path for you, don’t let someone else shame you into quitting your real job.

What if you like your real job?

There are plenty of people who like their jobs. And there’s nothing wrong with that. Most of us just want to feel like we’re doing something meaningful and that we’re appreciated. If you have a job that lets you do that, and you like it, there’s no reason to give it up for a freelance lifestyle or the uncertainty of trying to establish a company from scratch.

Take a look at your career. Do you like what you do? If you don’t, can you retrain to do something that you like better? Do you feel like you’re moving forward? If so, there’s no shame in having that real job. Stick to it, and be proud of what you do.

The 9-to-5 lifestyle has perks.

Entrepreneurs and lifestyle business gurus might not believe it, but there are perks associated with a 9-to-5 lifestyle.

First of all, it’s hard to underestimate the joy of a great benefits package. Health insurance, when not subsidized by your employer, can be quite expensive. I know. I spent 10 years paying for my own health insurance. Now, my new employer, Student Loan Hero, offers a monthly stipend for health and wellness. It’s not quite the same thing, but it’s a total upgrade from my previous complete lack of benefits.

Plus, when you contribute to an employer’s retirement plan, there is a chance that you will end up with a match. Now that’s a perk. Free money, growing in a tax-advantaged account.

Another perk of a real job is the fact that you can clock out and leave your work at work, rather than bringing it home all the time. I know folks who just want to turn it off, enjoying family, relaxation, and friends when they get home from work. That’s harder to do when you have your own business. In fact, I have to make myself step away from the work. There are days I find myself daydreaming about a real job and what it would be like to just clock out.

Depending on your employer, you might receive other perks, like:

  • Paid time off for vacation and sick days
  • Child care stipend
  • Gym membership or discount
  • Access to company car and/or phone

Enjoying the perks of a regular job is nothing to be ashamed of. If you like it, prefer the convenience, and just like knowing what’s going on and when it’s happening, stick with the job. Don’t feel like you have to give all that up to meet someone else’s idea of what you “should” do in order to achieve financial freedom.

Understand the dark side of self-employment.

There's No Shame in Having a Real Job

Before you make your decision, make sure you consider the dark side of self-employment. I love working from home. I value the freedom and flexibility too much. But there are times that it can be stressful, and I dream of simpler times.

When you’re self-employed, everything’s on you. If you don’t work, you don’t get paid. You need to be on top of your game and work even when you don’t feel like it. There’s no calling in sick when you’re on your own.

You might also be at the mercy of a client if you are in a position where you need the money. I remember times when I put up with all sorts of shit from clients. I needed the money. Today, I don’t have that issue. But it took some time to get here. If you’re going to be self-employed, you need to be prepared to work hard and sometimes do stuff you don’t want to do.

Finances can get dicey as well. You’re in charge of your taxes, including both ends of the payroll tax. Income isn’t always the same each month, so you have to be able to plan for down months. From putting together your own benefits package to figuring your taxes, you need to be ready. Don’t forget about the overhead that comes if you get an office offsite and if you hire someone to work for you as you expand.

While there is no way I would give up my situation, there are times I struggle. Go in with your eyes open if you decide to ditch the real job and join those of us in our alternate reality.

Don’t let anyone tell you they have the ONE solution.

There’s nothing wrong with being self-employed and ditching the world of traditional employment. However, there’s also nothing wrong with sticking with your real job if it works well for your situation and lifestyle. As long as you are careful to plan for the future and save up, a real job can be one way to ensure that you meet your needs.

Figure out what works best for you, whether you just want a side gig for a little extra cash while maintaining your day job, or whether you hope to eventually move on from the daily grind.

But don’t make your decision based on feelings of shame that you aren’t doing what you’re “supposed” to do.

Like what you’ve read?

Join other #adults who receive free weekly updates.


For a limited time you’ll receive our new book, The Best Bank Accounts for Adults, when you sign up!