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If your income isn't regular, this is how you should budget your expenses

Photograph: Adeolu Eletu/Unsplash

Several independent professionals and full-time employees are now in the same boat. But don't let uncertainty get the better of you. Follow these tips to save up and sail along.

Uncertainty is the one thing of which we can be certain in these times of pandemic. It doesn’t matter if you’re an independent professional or a full-time employee, chances are that your income isn’t as regular as it used to be. And so it’s probably prudent to start by budgeting your expenses like the way we’ve been doing.

1. Embrace the possibility that you may not have your salary coming in next month

We often tend to spend a lot of our money on the assumption that we’ll receive the salary SMS at the beginning of the next month. It’s a very subconscious thing but it happens – a dress here, a bag there, the credit card swipe against the latest iPhone even though you don’t have enough cash on you – we’ve all done that. The first step to being able to budget your expenses is to be mentally prepared for the fact that you may not receive that SMS at the beginning of the next month. Once you’re prepared for that, you are bound to start thinking differently, perhaps even conservatively.

2. Spend your money on paper first

This is to say that you need to write down how much you are spending. Start by jotting down all your essential expenses – rent/EMI, groceries, electricity and mobile bills, and transportation (from back when you used to travel to and from work). Redirect your earnings to cover these expenses first. Everything else goes into an account that you don’t touch.

3. Take cues from kakeibo

Kakeibo, the Japanese art of saving money suggests that instead of focussing on saving, focus on spending instead. Ask yourself on what things you can spend the money you’ve saved. And because you are saving so you can splurge, chances are you will be more practical about your splurging. For instance, if you’ve been eyeing the latest iPhone, don’t just go ahead and swipe your credit card; save up the entire price of the iPhone. When you finally have that in liquid cash amount in your account, you will likely realise the value of it given how long it’s taken you to save that amount. Whenever I do this, more often than not, I end up realising that I don’t really need that thing I’ve been eyeing all along and I save up that money for a rainy day with no regrets.

4. Pay off your debts if you can

There are two ways to approach your personal loans or credit card debts: you can either pay them off as a lump sum or you can factor the EMIs in your monthly expense. There are arguments for and against both these approaches. It is likely that you don’t have the kind of cash required to clear out the entire amount. In which case you don’t have a choice but to add them to your essential expenses. But if you do, it’d be better to square off your debt and start on a clean slate rather than have that one additional expense every month. Clearing off the debt will also mean that if your income suddenly stops for a month or two, you aren’t faced with the prospect of dealing with debt collection calls from your bank.

Disclaimer: Note that this article is meant for informational purposes only and should not be treated as expert advice. Please consult your investment or debt advisor to create a plan that is best for you.