Comments on: How to Handle Irregular Income

By: Victorino

Victorino — Thu, 18 Mar 2010 14:51:41 +0000

Nice tips here. I also have irregular income, and the always solution for me is to have an emergency fund. Yes, I agree that we should always prioritize paying our obligations especially our tax dues. Also, we should always have a good accounting. That is – we should only touch our net profit and never the whole revenue.

By: Debt Kid

Debt Kid — Wed, 17 Mar 2010 23:12:54 +0000

Nice to see you mention taxes first.

I had a friend that didn’t realize that she had to pay taxes on freelance contractor work. She wasn’t very happy. But, I think anyone who works for themselves must have some tax knowledge, because unlike a W-2 worker, you need to be actively managing your own employment taxes!

By: Laura

Laura — Wed, 17 Mar 2010 11:39:58 +0000

@Squirrelers : I definitely agree that if your income is a bit irregular, you should be conservative. I budget based on my regular portion of my freelance income that remains pretty steady. Anything above that I budget when I receive.

By: Squirrelers

Squirrelers — Wed, 17 Mar 2010 03:11:49 +0000

Good topic.

How I would handle this money is dependent on exactly how “irregular” is defined. For purposes of this post, I’m going to take this defintion as being supplemental or incremental cash flow, from a side business or the like.

If there is personal/credic card debt, apply it to that. Assuming this doesn’t exist, it would be a good idea to use this to build an emergency fund, while reinvesting some money back in the business.

There’s really no perfect answer or approach, but I think that the main thing is that its best not to count on this side income. Much like how I suggest handling a tax refund, don’t plan around it. Treat it as a bonus.

By: Pam

Pam — Wed, 17 Mar 2010 01:12:18 +0000

Any extra income that I earn I usually tuck away into a savings or investment account or I put it towards paying down our mortgage. I don’t even consider it as part of my income so then I am not tempted to spend it.

By: Ginger

Ginger — Tue, 16 Mar 2010 18:41:45 +0000

We are lucking, my fiance’s regular income pays for all of our regular bills so my irregular income goes straight into saving/debt repayment/investment but the advice is wonderful.

By: Nickel

Nickel — Tue, 16 Mar 2010 16:56:55 +0000

I typically set aside 50% of all side income in a dedicated savings account. From this, I pay state and federal taxes, make SEP-IRA contributions, etc. This is overkill, but I’d rather have too much than not enough money laying around when April 15th comes. After I pay taxes, I invest the leftovers.