As a student or new graduate, you’ll likely have to take on freelance work and part-time jobs to make ends meet. While this irregular income helps pay the bills and make payments towards your student loans, not having a steady paycheck can make it difficult to stay on track financially.
Thankfully, there are ways to balance debt repayment along with other financial goals by adjusting your strategy. Here’s how to avoid common pitfalls when you don’t have a regular paycheck.
1. Set a target income goal
Do you know how much money you need to pay the bills and feed yourself? What’s the bare minimum you need to earn to cover the essentials? Write down all of your monthly expenses and then compare this figure to your earnings. Do you need to earn more, spend less, or a combination of the two?
Make your bare minimum expenses number your target income goal every month, so you can at least cover the basics. Any money you earn over this amount can go towards bonus goals like an emergency fund, travel plans, or entertainment. While you can’t guarantee that you’ll hit this income goal every month, it will give you a number to shoot for.
2. Create a regular paycheck from your irregular income
Although you don’t receive a regular paycheck from an employer, it’s still important to set yourself up with a system that mimics a consistent paycheck.
- Open a separate bank account for your irregular income budget. As you send out invoices or get paid for part-time work, deposit all of your funds into this new bank account. Keeping this money separate from your other bank accounts will make it easier to manage.
- Pay yourself a designated paycheck every week. Calculate a regular “paycheck” amount and set up an automatic transfer from your earnings account to your household checking account. The amount of your “paycheck” should be what you need to pay your bills, plus a bit extra to cover incidentals.
- Stash away any extra money as a cash cushion. Any funds that remain in your separate earnings account can help make up for any low-earning months as well as prevent emergencies from derailing your goals. If there’s a delay in receiving a payment or other expected income, you won’t come up short because someone owes you money.
When you’re dealing with irregular income, it may take a few months to adjust to this new “paycheck” strategy, but in the end it will help combat the ups-and-downs of not having a steady income.
3. Separate your financial goals
For many people, having a lump sum in any one bank account is too tempting not to spend, and makes it difficult to make headway on different financial goals. For this reason, I recommend separating out your debt payoff or savings goals and opening up new bank accounts for each one.
I’ve personally done this in my own financial life, as my husband and I are both self-employed and deal with an irregular income budget on a monthly basis. For large bills, like our $1,800 per month rent payment, we opened a separate savings account where we transfer over $450 per week to cover this expense. We’ve never had an issue paying our rent or other large bills since using separate bank accounts.
While it’s possible to have too many checking or savings accounts opened at once, this strategy is enormously helpful when you aren’t receiving a regular paycheck. You can also use cash to separate out your savings goals if you don’t want to deal with multiple bank accounts. Either way, it’s important to divide up your money so you know it’s available for a particular expense when you need it.
4. Save more money with a microsavings app
Microsaving is a growing trend where you save extremely small amounts of money, starting at $1 per week, towards various goals. Creating a successful savings habit starts with small amounts added up and increased over time, so don’t underestimate what just $3 or $5 per week can do.
There are several microsavings apps that have recently become popular to help you save money without thinking. If you have a smartphone, that’s all you need to save more money, get started investing, or pay down your debt.
- Digit. Quickly becoming a new favorite, Digit allows you to save money every week via text message. Based on however much money you have in your account that week, Digit will automatically withdraw $1 to $24 and deposit it into your Digit account. You can access your funds at any time, or leave them alone to save up for a rainy day.
- SmartyPig. SmartyPig works as a free online bank for individuals saving for short-term goals, like a weekend getaway or upcoming wedding. Your savings goals are divided into different accounts so you can track each one separately. Think of it as a digital piggy bank that also rewards you for saving money and reaching your financial goals.
- Acorns. Acorns is a microsaving investing app aimed at helping beginner investors and students get started with investing. The app rounds up your bank’s withdrawals and transfers the difference to your investing account. For example, if you make a purchase for $10.41, the app will round the amount up to $11 and transfer the remaining $0.59 into your Acorns account.
5. Perform regular budget meetings and audits
As you move into different stages of your life, your financial goals and priorities will change. It’s important to adjust for these changes and perform regular audits so you can stay up to date with your goals on a regular basis.
This step is extremely important for irregular income planning because you may need to adjust how much you’re paying towards debt, increase your retirement savings, or edit an automatic savings transfer. Not being flexible with your ever-changing income can be devastating for your debt or savings goals. You could end up in a financial bind (or worse, even more debt) because you didn’t calculate for changes in needs or priorities.
As with any other financial goal, it will take time to change your money strategies and implement new savings habits. Keep at it until you find a good rhythm and style that works for you, and you’ll be able to overcome the financial roller coaster that’s associated with irregular income.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|