Five steps

How should you start developing your financial wellbeing, especially if you are on an irregular or varied income? Here are five steps which can help you get engaged with, and on top of, your money.

1. Get budgeting

The idea of putting together a budget or spending plan might make you want to run for the hills, but it is arguably the critical piece in increasing your financial wellbeing, particularly if you are on a variable income.

Having a robust, well-thought-through budget means you’ll be able to understand and control your spending, make informed financial decisions, set and track your financial goals, as well as save for unexpected circumstances.

There are a few steps you’ll need to take. Be completely honest with yourself, look at what you have coming in and going out and how you can affect those. Plot out the things you have to pay for and the things which are less essential, consider what parts of your money are fixed, variable or occasional. Next, be consistent and track your spending each day or week. Keep yourself motivated by what your budget will enable you to do and don’t beat yourself up if you occasionally stray off budget. Finding the balance means that looking after your money doesn’t stop you looking after yourself! Lastly, regularly review your budget or spending plan and always keep it effective for today.

The hardest part of budgeting genuinely is getting started, but once you have it in play, it’ll become a habit and you won’t know what you did without it.

There are many different options out there to get budgeting, whether you use an app like our Budget Builder, your bank’s budgeting tool, or just good old Excel. The important thing is finding the method you find helpful.

2. Get 'income smoothing'

If you are self-employed, your work comes from several different sources or you do both, plotting your income in a regular way can initially seem tricky. But a few suggestions, around what a business would call ‘managing cashflow’ but we prefer to call ‘income smoothing’, may set you right.

Firstly, try to get ahead of yourself. Aim to start each month with all your essential expenses in the bank. That way you know exactly what you can afford to spend from what’s left and you won’t be racing to earn what you need. Getting to this cushioned point may take time but it’s a great goal to work towards.

Secondly, aim for creating an emergency fund. All self-employed people will have times they earn less or can’t work, so each time you do get paid, try to seed this fund. Two months’ essential expenses is a solid goal if possible. Making this part of your monthly spending plan will also really help. While you’re making this fund, you might also want to look towards creating other ‘pots’ of money for named purposes, ie ‘the car pot’, ‘the Christmas fund’.

You might find it helpful to set up separate bank accounts to cover different types of spending (eg bills, rent, subscriptions etc) and then set up standing orders to transfer money into these accounts from your main account and direct debits for each of the bills from each of the accounts. Alternatively, there are jam jar bank accounts designed to let you divide your money into different 'pots' within your main account. When money comes into your account, the amounts you've agreed are set aside in the pots for your essential bills and then these are paid via direct debit or standing order. It is important to check the terms of and conditions of these types of accounts.

Thirdly, if you’re spending, during good periods, why not look at bulk-buying non-perishable things you know you’ll use, or overpaying on certain bills and accounts to build up a little credit.

Lastly, whichever of these options you use, or even something else, take it all step-by-step. Make your steps realistic, achievable and scalable. It’s not easy and some weeks and months you’ll slip up, but persist and keep going.