I am a big believe in having systems in place so you can begin to operate your financial life on auto-pilot and make it as simple as possible. But what happens when your income varies each month? Maybe you have a salary but a large portion of your income is bonus type pay or you are self-employed and do a lot of project work so you get paid in chunks throughout the year. The typical Empowered Planning Golden Rules can be difficult to put into practice and can be met with resistance if you are winging it every month. Fluctuations in income can encourage you to use credit cards to float yourself to the next month and can result in unwanted debt.
The solution for this is to create your own consistency. You can do this by depositing the money you earn into one bank account and then set up bi-weekly transfers into a checking account.
You want to have money readily available as your bills come in each month.
Here’s 3 simple steps to win at this game by creating your own steady paycheck:
1. Open a savings account for when you get paid.
I call it my “Getting Paid” Account. You should deposit any and all pay you receive in this account.
2. Pay yourself every two weeks or monthly.
Set up an additional account that will be your checking or self-created “Paycheck” account.
You essentially create your own paycheck equivalent. Figure out what your typical expenses look like each month and this will be your paycheck amount. You can break this down into bi-weekly increments or once a month, whichever you feel more comfortable with. You set up automatic transfers from your “Getting Paid” account into your checking or “Paycheck” account.
3. Keep any extra cash in your Getting Paid account.
If you have cash left in your “Getting Paid” account after you transfer your bi-weekly or monthly payments into your “Paycheck” account, just let the excess cash sit in your “Getting Paid” account. This cushion helps prevent disaster in case something happens. If there’s a delay in receiving a payment, commission or other expected income, you don’t want to miss your paycheck because a person or company owes you money.
Be patient and kind to yourself while you’re setting this up. It may take some time but now that you have a system set up you can keep your eye on the prize to make this a reality! You got this!