Be your own boss – and boss your budget

Last updated on 12th December, 2017 at 05:10 pm

Being self-employed has wonderful perks, but it also has its drawbacks – like not earning a regular and steady income. With careful budgeting, though, you can easily overcome the financial insecurity of a fluctuating salary.

Freelancers and small business owners don’t have the luxury of looking forward to a payslip at the end of the month to fill the financial holes. On the contrary, it takes careful planning and painstaking calculations to provide for the months in which you simply don’t earn an income, or get paid very little. Here are a couple of budgeting musts for people who don’t get paid regularly:

Use the ‘worst case’ scenario

When you draw up a budget, it is wise to be extra conservative and base your income on the lowest possible paycheque you may receive in any given month. This will allow you to make provision for any eventuality, and to build on the financial buffer you had set aside when you first started out as a self-employed individual.

List your expenses

Write down a comprehensive list of annual, quarterly, monthly and weekly expenses. Over and above the typical expenses, such as a bond, insurance, school fees, groceries, car payments and entertainment etc, you should also compile a list of the money you spend on donations, savings, paying off debt and investments. Indicate behind each item of expenditure if the amount is fixed or if it fluctuates. If the latter is the case, calculate your expenses with the highest possible amount in mind to make sure you’re covered. Underestimating your expenses is one of the biggest mistakes you can make.

‘Pay’ yourself a fixed salary

It’s easy to slip into the habit of spending more money during months when you earn a higher salary. Calculate the amount of money you’ll require monthly to cover all the above-mentioned expenses and stick to it.

Set financial goals

There are times when we’re financially less disciplined than we should be. To avoid unnecessary spending, make sure that you have clear, yet attainable financial goals. That may include anything from saving for an overseas holiday, paying off a bond or credit card debt, or saving up for a deposit on a house. When you are self-employed, it is a huge asset to have a financial planner you can trust, who can help you achieve your financial goals. Last, but not least, if you keep your debt as low as possible and save intelligently, your variable income can become as stable as that of your peers, family and friends.

By Liesl Peyper