When your income fluctuates from week to week or month to month, managing finances can feel daunting.
However, with a few smart money management strategies, you can take control of your finances and achieve your financial goals, regardless of how unpredictable your income might be.
Let’s Get Straight to the Point
Managing a variable income can be challenging, but you can stay financially stable with a strategic approach. Start by creating a budget to track your spending and prioritise needs.
Save regularly, even in small amounts, to prepare for leaner periods. Use bill smoothing options to break down large expenses and avoid borrowing to pay off debt.
Understand your employment rights and entitlements, and stay on top of your tax obligations. If needed, seek help from financial experts for confidential advice.
These steps can help you take control of your finances and achieve your money goals.
Understand Where Your Money Goes
Create a Personal Budget
The first step to managing a variable income is understanding where your money goes. A budget is an important financial tool that helps you track how much money comes in and goes out each month.
This money plan clearly shows your spending habits and puts you in the driver’s seat, allowing you to make informed decisions about needs versus wants.
When building your budget, list all your regular expenses, including essentials like rent, groceries, utilities, and discretionary spending.
Knowing where your money goes lets you prioritise what matters most and make necessary adjustments during leaner months.
Start Saving for Lower Income Periods
1. Cultivate a Savings Mindset
Even if you can only put aside a small amount, saving regularly is key to managing a variable income.
Developing a savings mindset ensures that you’re better prepared to cope when your earnings dip or if you need to take unpaid time off.
2. Open a High-Interest Savings Account
To get started, consider opening a savings account that offers a bonus interest rate if you meet certain conditions, such as making regular monthly deposits.
Some accounts also provide benefits for individuals under 30, so be sure to explore options that best suit your circumstances.
3. Set and Achieve Financial Goals
Setting financial goals is a vital part of managing your savings.
Whether building an emergency fund, saving for a major purchase, or simply creating a financial safety net for leaner months, having clear goals can motivate you to stay on track with your savings plan.
Smooth Out Large Bills
1. Consider Bill Smoothing Options
Large, unexpected bills can be stressful, especially when your income varies.
One way to manage these expenses is to use bill smoothing options offered by many service providers, such as electricity, water, and phone companies.
Bill smoothing allows you to break down larger payments into smaller, regular instalments—often fortnightly or monthly—making it easier to budget for these expenses.
Reach out to your service providers to see if this is an option for you.
2. Avoid Additional Debt
When managing a variable income, relying on credit cards, buy now, pay later services, or loans to cover expenses can be tempting.
However, borrowing to pay off other debts can lead to a cycle of financial stress. If you struggle to keep up with bills, consider seeking help from a financial counsellor and try cutting down on expenses that are more related to needs than wants.
Know Your Employment Rights
Check Your Employment Entitlements
Your type of employment affects your pay, conditions, and entitlements. If you’re a casual worker, you might not receive paid holidays or sick leave, but you are still entitled to superannuation if you’re over 18 or work more than 30 hours a week and are under 18.
If you’re uncertain about your employment status—whether you’re part-time, casual, or a contractor—it’s vital to clarify this with your employer.
Understanding your rights and entitlements can help you better manage your finances.
Discover Casual Conversion
If you’ve been a casual employee with the same employer for at least 12 months and have worked regular hours, you might be eligible for a casual conversion to a permanent full-time or part-time position. This could provide more stability in both your income and benefits.
Stay on Top of Your Tax Obligations
Know Your Income Tax Requirements
The amount of tax you pay depends on your income, and it can vary as your income changes from month to month.
Understanding how income tax works is essential for managing a variable income. The Australian Tax Office (ATO) provides resources that explain tax obligations, including those for side hustles and self-employment.
If you earn extra income through a side business or freelance work, make sure to set aside money for taxes and stay informed about deductions you may be eligible for.
This will help you avoid unpleasant surprises when tax time rolls around.
Get Help When You Need It
Access Financial Counselling Services
If you’re feeling overwhelmed by your financial situation, there are free and confidential services available to help.
Financial counsellors can provide advice on managing debts and creating a workable financial plan to get you back on track.
You can contact the National Debt Helpline at 1800 007 007, available Monday through Friday from 9:30 a.m. to 4:30 p.m., or use their live chat service.
Aboriginal and Torres Strait Islander people can call the Mob Strong Debt Helpline at 1800 808 488 during the same hours for culturally sensitive financial support.
Conclusion
Managing a variable income might feel challenging, but with careful planning and budgeting, you can smooth out financial stress and work towards your savings goals.
By knowing your entitlements, taking steps to save regularly, and staying on top of your expenses, you can create a smart money management strategy.
This provides stability and peace of mind, no matter how unpredictable your income stream might be.
Frequently Asked Questions
1. How do I budget with an unpredictable income?
Create a budget based on your average monthly income. Prioritise essential expenses and adjust discretionary spending when your income fluctuates.
2. How much should I save if my income varies?
Aim to save 10-20% of your income during high-earning periods. Building an emergency fund with 3-6 months’ worth of expenses can provide a cushion for leaner months.
3. What is bill smoothing, and how does it help?
Bill smoothing allows you to pay large bills in smaller, regular instalments (fortnightly or monthly). This helps you avoid unexpected expenses and manage your budget more effectively.
4. How can I handle large expenses when my income changes?
Use your savings to cover large expenses and use bill smoothing options. Avoid taking on debt to pay for bills; plan ahead during higher-income periods.
5. What financial support is available if I struggle with a variable income?
Contact financial counsellors through services like the National Debt Helpline for free, confidential advice. They can help you manage debt and create a more sustainable financial plan.