For professionals and some others there is no fixed income source and their incomes fluctuate month on month. So here is a word of help for those falling in this category to better manage their finances.
To better manage your finance and achieve the targeted financial outcome at some point in time in future despite the constraint of irregular cash flow you can go by the following few steps:
1. Know your expenses and prepare a budget: Depending on your cash flow which is not fixed you need to know the trend of your income. For arriving at the average or say close to your income estimates, it may be a good call to consider the lowest income levels in a month.
Accordingly you have to deploy funds to various expenses head which cannot be done without with such as food, housing, family expenses, health, insurance, transportation etc. Also, in such a situation it is best to keep aside some funds for big expenses that accrue on a annual basis such as an insurance expense, tax etc.
2.Pile up cash to meet any income deficit or delay: Money knows no substitute and when the cycles of income and expenses do not fall in line, it is your piled up cash that shall come in rescue. There can be times when you earn hugely so do not resort to extravaganza shopping spree at this time rather add to your cash reserves as it help to tide away any volatility. A cash buffer for an initial of six months is suggested by experts. Other than this you should accumulate an emergency fund for meeting some of the financial exigencies.
3.Discipline savings and investments and create passive income source: As the otherwise savings for retirement through a dedicated fund are not the case when it comes to earnings of a professional. It all the more becomes necessary to contribute for retirement other than accumulating funds for other investments for your family.
In fact money towards savings need to be diverted prior to meeting out any expenses. For large financial goals you can begin with small budgetary allocation each month. Regardless of your plan, you need to closely monitor your savings such that they do not not fall out of place.
You can also aim at streamlining your income flow by generating a passive income source such as dividend, rental income, interest etc.