Consumerism Commentary - Latest Comments in How to Deal With Unpredictable Income

Re: How to Deal With Unpredictable Income

Money Lady — Fri, 12 Sep 2008 21:01:57 -0000

Don't quit your day job until you satisfy the 5 criteria below.

1. Need to have at least enough income to pay your expenses coming in on a predictable basis.
2. Need to have purchased your own health, disability and life insurance coverage.
3. You have saved up enough "cushion" to get you through the lean months.
4. You have qualified for a HELOC on a personal residence if you own one, or are not planning on purchasing a house for over 3 years.
5. You're absolutely sure that's what you want to do.

Good luck!

Re: How to Deal With Unpredictable Income

Dividend Growth Investor — Fri, 12 Sep 2008 10:35:02 -0000

I think that a good way to start diverisfying your income streams is to focus on investments as well ( which I think Flexo has done).
First, if your monthly expenses are $1000 ( nice round number) and you know that your online ventures can generate $500, you can generate $500/month with interest, dividends, rental real estate.
A popular method for short term budgeting is using CD ladders. If buy a $10,000 one year CD yielding 5% every month for one year you will have achieved the extra 500 in monthly income..

When I look at investment income versus work income I see how much money I need to save and invest before I could live off my investments..

Re: How to Deal With Unpredictable Income

jake — Sun, 07 Sep 2008 20:52:20 -0000

Usually, all my non-paycheck money goes into savings, then into a money market account or CD short term (6 months). I sometimes have to keep my money not liquid because my wife and I both have a habit of spending it if we have it...heeh

Re: How to Deal With Unpredictable Income

adrian — Sun, 07 Sep 2008 02:19:25 -0000

I'm self-employed and have a wildly irregular income. I deal with this by keeping my monthly fixed bills as low as possible and pay annually whenever the option is there. Sometimes when I get paid a sizable chunk of money, I'd lock it in a certificate of deposit (don't know the American equivalent, sorry) to pay an upcoming major bill - better return than a regular savings account, and less temptation to use it for something else.

I also keep a big savings cushion, not just for emergencies but also to take advantage of any good sale on the stuff that I need. (Frugality and a healthy stockpile can help you weather plenty of lean times.) I save up for major purchases and then sit on that money some more until a good deal pops up. I have no debt, pay my credit card bill in full every month, and avoid payment plans since they'd undermine my flexibility.

One thing you might want to watch out for is the lifestyle inflation when you've just got yourself a big paycheck - like the article said, you can't maintain the utopian view that things will forever be as good as they are now.

Re: How to Deal With Unpredictable Income

CJ — Fri, 05 Sep 2008 17:19:57 -0000

Flexo,
I think it's great that you are looking to jump into a self-employed status. Here's one thing that I would recommend to help reduce risk:

"Make sure you have multiple streams of revenue"

This is key. For instance, if a regular employee lost his or her day job, they would be in a worse situation than you possibly having a bad month running your online ventures. Just make sure you have multiple streams of revenue from multiple online ventures. I don't know exactly what websites you run, but you will most likely want to expand them and create new blogs or websites. Then if one completely fails, you can rely on others. Also if one big advertiser cancels a contract, you will have many others to help lighten the load.

If you do that, you shouldn't need to worry at all. Courage isn't the lack of fear, it's just facing fear head on and not letting it overtake you. You can do it!

Re: How to Deal With Unpredictable Income

Harlan Landes — Fri, 05 Sep 2008 00:54:19 -0000

Heh. Thanks for the comments and support! I'm strongly considering making the jump but not until I work out a strong plan that covers all the basis, from all types of insurance I'll need and related expenses to a "re-entry strategy."

Re: How to Deal With Unpredictable Income

Mike — Thu, 04 Sep 2008 23:17:46 -0000

Just quit the job already - you make sh** wages at it and you make 2x as much with the blogging.

If the blogging doesn't work out then you shouldn't have any problem going back into the work force at the same wage you are making now or more.

Do it!

Re: How to Deal With Unpredictable Income

Keith — Thu, 04 Sep 2008 22:47:10 -0000

Flexo - unless you have big plans on the table for expansion of your online ventures, I don't think it's a bad idea to hold on to your dayjob if you can handle the load. With the dual income stream and the coming capitulation of the markets, you ought to see some serious net worth gains over the next 2-5 years.

Re: How to Deal With Unpredictable Income

Kristie Tamsevicius — Thu, 04 Sep 2008 15:44:32 -0000

As a small business owner, I ran a web design shop. Sometimes the clients didnt always pay on time. Other times a project was long and drawn out. And when you have to wait until completion to get paid, that can space out your paydays. I have on occaision had to use a payday loan to get a cash advance from my paycheck. That way when I had a business bill due, I was able to take a cash loan from my next paycheck, get it in the bank, and write a check for an upcoming bill on time. It was a simple way for me to ensure I never had late charges or dings to my credit score cause I didn't have the cash to pay a bill.

Re: How to Deal With Unpredictable Income

myinvestingblog — Thu, 04 Sep 2008 12:52:32 -0000

My biggest thing is the insurance. We've got 2 and are expecting a 3rd kid here shortly so the insurance is a big one to think about absolutely. Being able to show a "low" number over 12 months would at least give me a better feeling of letting go of the corporate gig for sure...

Re: How to Deal With Unpredictable Income

Orange — Thu, 04 Sep 2008 12:04:38 -0000

My income is too half flexible, I work on contract bases and my contract expires three times a year, even though I know I will get paid, I never know the exact amount of my paycheck right after the contract expiration. So budgeting with an unknown number is a challenge. In some cases also I do not get biweekly, instead I get paid monthly, that also affects my budget and bill payments. I found that what works for me is to keep liquid assets (cash) in easy to reach savings accounts, even though I can make more out of the money in a CD, I can't risk it.

Re: How to Deal With Unpredictable Income

TML — Thu, 04 Sep 2008 11:14:44 -0000

Another problem with fluctuating income is insuring against its loss, e.g., disability insurance or business interruption insurance. If a claim is made, teh carrier will tend to skeptical as to the level of income being claimed as a loss.

Re: How to Deal With Unpredictable Income

Miranda — Thu, 04 Sep 2008 08:07:48 -0000

Thanks for this great post! I, too, have an income that is somewhat "flexible." I am lucky enough, though, to have some regular writing gigs that ensure that about 2/3 of my income is set. Of course, I could suddenly lose those jobs...

We recognize that we need to pad our emergency fund, and maybe cut back so that we are living on less, though. This will help up be better prepared.