Welcome to another episode of The Good Cents by Payactiv podcast. Hosted by Eric Rosenberg, this episode delves into the challenges and strategies of managing finances when your earnings fluctuate month to month. Whether you’re a freelancer, gig worker, or self-employed, understanding how to budget, save, and plan with an unpredictable income is essential. Join us as we explore practical advice and insights from finance expert Eric Nissel, ensuring you can navigate the ups and downs of your financial journey with confidence.
Listen below or read the transcript that follows.
Eric Rosenberg:
This is a friendly reminder that today’s episode should be considered for education and entertainment purposes only and should not be considered financial or legal advice.
Hello my friends. Welcome back to The Good Cents by Payactiv podcast. As always, I am your host, Eric Rosenberg, and today I’m excited to talk about a topic that affects me and my financial life quite a bit, and that is irregular income. So if you’re an hourly worker or a gig worker or if you’re self-employed like me, you’ll see that your income goes up some months and down some months, and that can make it a lot harder to budget than if you have a salary where you get paid the same amount every payday. So today I brought on a guest who is an accountant and finance helper for people who have irregular self-employed freelancers. His name just like mine is Eric. He has been doing this for quite a while. He knows all about how people should deal with their income going up and down as he’s helped clients navigate for years. So we’re going to dive in now with Eric Nissel and talk all about how to manage irregular income.
All right, everyone. So I am here today with someone who has an amazing name and I know I’m a little biased being named Eric. My friend Eric is here. I’ve known him for about a decade through the FinCon world. And we are here to talk all about how we deal with our income going up and down every month and how Eric helps people who have their income go up and down every month. So Eric, welcome to the show. We’re glad to have you.
Eric Nissel:
Thanks for having me. And actually it’s probably closer to a decade and a half, maybe even, almost two decades by now.
Eric Rosenberg:
Wow, that makes me feel old. It probably is a decade and a half. Don’t make me think that, Eric. It’s-
Eric Nissel:
Yeah, 2008, 2009, somewhere around there is when the blogging all started.
Eric Rosenberg:
Yeah, yeah, you’re right. You’re right. If I think back that far, so at that point in my life, specific to the topic we’re dealing with today, I had a really stable day job income. I was working in finance and accounting at big companies. And I started this little blogging, podcasting side hustle, and my income started going up and down every month. I knew I was going to have a certain base income from the day job, but I never really knew exactly what I was going to have at the end of the month. And at that point, the excess income I had, and I call it excess because I was lucky to have more income than my bills that I all put towards my student loans and my car loan and trying to get out of debt, but nowadays, I don’t have that base income anymore. I’m self-employed like you. My income one month could be what feels really great, but then the next month I might not make enough to cover all my bills. So that is an interesting place to be in.
So my first question for you is, if you were talking to one of your clients or even dealing with your own money being self-employed, knowing your next month’s income might not be the same as this month’s income, what would your number one tip be for budgeting with irregular income?
Eric Nissel:
Honestly, I always tell people, and this is what I do it myself, be honest. Don’t try to sit there and convince yourself that it’s better than it actually is. It’s okay to be honest and say it’s confusing or it could be a bad month coming up. Because I literally, since the end of 2023, I had three clients leave because they didn’t have good businesses that could support paying me a monthly fee. So my income actually did go down recently. Instead of sitting there and saying, “Oh, it’s going to be okay, it’ll get better, I just have to manifest it or do this or that thing positively,” I face the reality that yeah, I just lost three paying clients. Once I accepted that reality, then I was able to move forward with everything and make a plan.
Eric Rosenberg:
Sure, that makes sense. And I know for me what I do, there’s some seasonality. I do really well typically in the fall and somewhat well in the spring. But then in the summer when everyone’s out traveling and camping and taking their kids to soccer games and things like that, my income tends to go down. I call it the summer lull. So I just know at this point that I will probably make less to three months from now than I am right now. And the first couple years that that happened, it was pretty jarring. It was upsetting to me that I had to tap into savings rather than just cover my bills with what I was making. But that brings me to my second question. When you have a regular income, when you know some months you’ll make more, in some months you’ll make less, how do you prioritize savings to ensure you’ll be okay in those down months?
Eric Nissel:
For me personally, it’s very simple. Right now we’re in the middle of tax season. So between February and May, I get a lot more money because it’s the one-off tax returns, one-off projects that come in. So what I do is everything that comes in, I don’t take it and spend it or I don’t give myself a larger salary during that time. What I do is I leave it there. And that way if something does happen, like I lose three clients or I lose another client during the year, that way I can maintain paying myself at the rate I was paying beforehand because that extra money, I basically ignored it. It’s just sitting in my account not doing anything.
And it’s the same for an individual with personal savings without a business account. I take money that I save and I put it into a high yield savings account. This way, just like they say, “If you don’t see it, you won’t miss it.” In terms of having a bonus or I just treat my tax season as a bonus, it goes away. I don’t look at it so that this way it will even out throughout the year in case something does happen.
Eric Rosenberg:
And that’s something if you are a Payactiv user and have the Payactiv account and get your direct deposit to your Payactiv account, you could automatically put a portion of your income aside without thinking about it. And that automatic savings1 is actually something I do myself. I automatically put a certain percent of my income aside. So in the good months, whether you’re religious or not, I like to think of the biblical story of an Egypt with a Joseph as there were seven good years and he predicted there were going to be seven bad years after seven years of drought. I know for me it’s not going to be seven good years and seven bad years, but it could be a good month and a bad month. So by automatically putting a little bit away every month, I know that during those bad months, I have a little something to fall back on.
And it sounds like you, Eric, do that by trying to keep a consistent budget. You pay yourself from your business the same amount, whether it’s a great month or an average month or a lower month, and that you kind of find that middle spot that makes sense for your finances.
Eric Nissel:
Yeah, I always try to tell people is know yourself, know your situation. If you know how much money you need to live on, it’s a lot easier to budget because then you know what you have to aim for in terms of saving to go towards your bills.
And I’ll be honest, I even use savings hacks to put extra money into savings. Whenever I go to the supermarket, if I use coupons or I get sales or whatever, you know how it says at the bottom of the receipt, you save this amount? Because most people budget for how much they’re going to spend at the supermarket, and if they save, that’s a discount to what they were actually going to spend originally, I just put that money into my savings account.
The same way if I have credit card points. I take those points. I don’t use them to buy stuff on Amazon or use them points for pay because they come out at a lower price. I just take that money and I bring it into my account and put it into savings account. This way, I’m basically the rewards or the rebates that I’m getting for what I was already spending, I’m just taking those and putting it into my savings for later on in case, again, something else happens later on, there’s a bump in the road, or we have another situation where businesses are shut down or there’s a slowdown in the economy or something like that.
There’s not just one way of doing it. You could get it from all different directions, but the most important part is you have to know what your expenses are in order to start.
Eric Rosenberg:
Yeah, that’s great advice. So we’ve talked about budgeting in a few episodes of this podcast before. So definitely if you’re a new listener, go back and check those out. Make sure you understand how your budget influences your money and what you can do to improve your financial situation.
So I love that advice because about two weeks ago I went to the grocery store to grab a couple of things. I think the thing that brought me in was a visit to the pharmacy had a prescription I needed to pick up, and I thought, “Oh, while I’m here. I’m going to grab a couple things to tide me over for the next few days.” And I noticed there was a sign on the door in the freezer section that said, “You can get 10% off all frozen food purchases if you snap this coupon code using the app.” And I happened to have the app for the grocery store, which is Vons here. It’s part of the Safeway Albertsons conglomerate, wherever you live in the U.S. And I thought, “Well, I wasn’t planning on buying all of these frozen things today, but if I could get them today and we were going to buy them anyway and I could get 10% off if I buy them right now, that’ll save me money compared to not getting that 10% off and getting them in a couple weeks so we were planning on it.”
So paying attention to those coupons, which I don’t always go onto my phone and look up the coupons when I’m in the grocery store, which they probably like, or this time I was actually able to save something like 35% compared to list price on what I bought that day. So that 35%, that’s real money. That’s 1/3 off of my grocery visit. Every one of those dollars counts.
Eric Nissel:
And every one of those dollars could go towards something else later on. Right.
Eric Rosenberg:
So rather than give it over to Vons and Albertsons Corporation, I gave it to myself or I just didn’t spend it. And because I know even though this month was a good month and it was okay for me to spend a little more at the grocery store, those dollars I saved or dollars I don’t have to spend next month, when I’m hungry, I can go grab that thing out of the freezer rather than go shopping.
Eric Nissel:
And now that you mentioned that, I want to interject with something that I find is very lacking in financial advice. You said saving the money. Here’s the thing, if you’re not putting that money away to actually save it and you’re just going to turn around and say, “Oh, I saved $10 at the grocery store, I’m going to go treat myself to McDonald’s or whatever,” just using that as an example, you’re not saving that money, you’re just moving it into something else. In order to save money, you need to physically save it, meaning you got a discount somewhere else, or you got the money in that you didn’t have to put out to another bill, but you have to put it away somewhere where you’re going to stockpile it, save it, physically, save it. Otherwise, you’re not saving money. You’re just reducing one expense to spend on another expense, which defeats the purpose.
Eric Rosenberg:
Something I love about that advice is it’s not just something that can help… I mean, mentally, you can see how that could help, but when you start to really think about it, if you can start adding that money up over time, a dollar here, $5 there, 15, $20 maybe on a grocery visit, all of a sudden that becomes an emergency fund that is enough money to help you break living from paycheck to paycheck. That is the kind of money that can really change your life. And while $20 might not sound like life-changing money right now, if you’re in debt or struggling paycheck to paycheck like a lot of us are, it doesn’t sound like life-changing money, but when you start to really think about it, $10 here, $20, there are $30 here, that’s $50, $100, all of a sudden you have enough savings that when you have that down month, when your income goes up and down, when you have that down month, you have savings to lean back on and you don’t have to worry so much about what you’re going to do next time.
Eric Nissel:
And on top of that, again, if you put it not into 0% interest, but when you have real interest, your money’s working for you, which means that every time you put money into your savings account, you’re earning on that money and it’s building on itself. So you’re getting that double benefit of not only are you protecting yourself in the future, but your money’s working for you instead of you working for your money.
Eric Rosenberg:
Yeah, I love that advice. Yeah. So let’s say, Eric, you were chatting with a client, somebody who is new to living with variable income. They know a little bit about budgeting, but budgeting with their money going up and down every month is a new concept. It’s something that they’ve never dealt with before. What would your biggest advice be to those people to better manage their money going into this adventure of not knowing if next month’s going to be a great month or a lower month?
Eric Nissel:
Be cautious. Don’t take one good month and think, “Oh, this is how it’s going to be forever.” You’ve heard the saying, “Plan for the worst and hope for the best.” That’s the approach that you need to take. Put your savings as the priority instead of trying to increase your lifestyle at first.
You mentioned emergency savings. That’s very important. We’ve seen what happened a few years ago when people were not going into work with layoffs and everything. That just emphasized the point that what a lot of people thought was a good emergency fund three months was literally not even a drop in the bucket. So when you are first into this whole thing with variable income, think of the good as a one-off. Plan for everything to be on the lower end. This way, you are getting used to living on the lesser side of things. And once you start seeing things potentially and hopefully being on a consistent uptick or an even uptick at least, then you could start to slowly adjust. But everything should be slow increments, never huge leaps and bounds from, not to be offensive to anybody, but from McDonald’s to 5-star restaurants in one month. It’s little baby steps is the best way to put it.
Eric Rosenberg:
That actually reminds me of when I was in business school, we had someone come to talk to one of my classes. His name was Terry Gold. He started a company called Gold Systems, and you might not love what he does when I tell you this, but he was one of the people who invented the systems where you could talk to a phone system and a computer would figure out what you were saying and it would send you to the next prompt. So you could say yes or no, and it could understand what you were saying.
Eric Nissel:
Yeah, phone trees are the worst invention ever.
Eric Rosenberg:
But when he invented those-
Eric Nissel:
All you just press is 00000 a hundred times until it goes to the operator.
Eric Rosenberg:
I mean this was about 20 years ago, these things were pretty new, and he got to put a bunch of patents into place and he made millions of dollars. He was extremely successful. And he told us that he drove to talk to our class at a 1980s, I think it was a Toyota or a Honda, really reasonably priced car that was 15, 20 years old. And he said to him, well, he has the means to have a nicer car. His car works fine. He doesn’t need to spend more on that. Instead, he focused on the things that were most important to him, and that’s where he directed his money.
So if your money is going up and down, even if you have a windfall month or a windfall year or a windfall life like Terry Gold did there, most of us will never see a few million dollars come in all at once, it’s best to take that advice he gave us and take a moment to step back and think, “Do I really need this purchase? Do I really need that fancy new car? Do I really need XYZ?” Whatever that thing is. You could go buy a cup of coffee every day. You could go spend 3, 4 or $5 a day at the coffee shop. You could go buy yourself a 5, 10, $15 lunch every day.
And while you might be able to get by doing that, if we’re able to pull those costs back just a little bit and live within your means or even below your means, that gives you more money to save and put away for the future. So if you do run into a down month or a down year or God forbid, lose your job or have a big expense in your family that you didn’t see coming, you’ll be okay because you are already living at a lower income point.
So remember, just because one month you might be able to go buy that Escalade or awesome new truck or whatever that thing is you want, living within your means the months that you’re able to means that the months that are tougher, you’re able to cover those bills.
Eric Nissel:
And there’s something that goes along with that. Also, I know people like to say, “Don’t worry about keeping up with the Joneses” and all that stuff, but it also stands to reason that you shouldn’t follow every single piece of advice that you see on the internet on social media or whatever, because not everybody giving financial advice is in the same situation that you are in. You need to vet all that stuff, number one, to see if they even have any qualifications to be talking about money, number one. But number two, they could be talking from their own experience.
So you take me, I’m not married, I don’t have any kids. If I’m giving you advice for how I live my life and blah, blah, blah, blah, blah, but you are like, Eric, and you’re married, you have multiple kids, you have a pet turtle, a tortoise.
Eric Rosenberg:
Tortoise.
Eric Nissel:
Tortoise, yes, sorry. Your lifestyle and your living expenses are going to be drastically different. Also, look at your location. If you are talking to somebody from let’s say Florida where there’s no income taxes, but they’re not telling you about the fact that you can’t get home insurance because nobody insures down here, your property taxes are through the roof, those things, they all play a part in the budgeting process. Just because there’s no income tax, “Oh, everybody’s going to go from California and New York to Florida.” Yeah, well, guess what all that means is that the cost of everything is going to go up. So if you follow suit and you’re already struggling, thinking that you could receive by not having income taxes down here, well now you’re going to have to pay more for insurance, more for rent, more for property taxes if you buy. Florida last year in 2023 I think it was, or 2022, the statewide tax went up 1%.
So you talk about that, and yeah, if you’re only buying groceries, you’re not paying sales tax. If you’re buying prepackaged food, you’re paying sales tax on that stuff. When you go to a restaurant, I think there’s an additional sales tax on top of that for a prepared food tax. So you have to take whatever you see and hear, take it with a grain of salt, but do your own research to see, “Does this fit my lifestyle? Does this fit my needs, my wants, my ideas of how things should be?”
Eric Rosenberg:
I love that you mentioned the Joneses because we always talk about keeping up with the Joneses. It’s a fun cliche in the US especially when you talk about money. But if you think about the Joneses, the average family in the US probably has more than $10,000 in credit card debt. And just in our last episode we talked about the debt avalanche and the debt snowball ways to pay off debt. So knowing what debt can cost, yeah, sure, you could go buy some new Air Jordans or Air Force ones or whatever the cool thing is these days, right? Kids these days. That makes me sound old saying kids these days, but really we need to sit back and think, “I probably don’t need those new shoes. I probably don’t need whatever that cool new thing is. I don’t need that new Escalade. But if I can live within my means, if I can budget well, that will help me deal with the ups and downs of living with a variable income.”
So do you have any other last advice for someone who doesn’t know if next month’s income is going to be the same as this month’s income, Eric?
Eric Nissel:
That really was my closing piece, was really to don’t take anything at face value. Don’t look at what’s on social media and take it verbatim that it’s even legal because you have people out there telling you to start an LLC so you can write off your entire life. You do that, you’re going to jail. And that’s not even a joke. If you get audited, you’re going to be going to jail for tax evasion and then you can’t blame that person for giving you bad advice because you shouldn’t be listening to somebody who’s paid to do a paid spot anyway.
But yeah, the biggest thing is always make sure you are looking at the source of advice, that you’re applying it to your own situation, that you’re not trying to replicate what somebody else is doing who may not be even remotely in the same type of situation that you and your family are in.
Eric Rosenberg:
Well, that’s great. Thank you so much, Eric. I appreciate those insights, especially knowing as you do accounting for people who are exactly in this situation where their income goes up and down every month. So if somebody wants to connect with you, if they like what you had to say and wanted to learn more, where should they go?
Eric Nissel:
My site that I write this exact stuff about is called understandfinances.com, and it basically covers this exact topic, how to vet and adapt personal finance advice to your needs. I discuss the basics of what is a tax return, how is it filed, what types of bank accounts are there that suit your needs, what kind of financial institutions are there for you to use for your money. Just financial basics so that people who were never given that kind of a background can educate themselves. Credit, real estate, owning your own home, the pitfalls, the benefits, all that type of stuff. And I just speak in a plain English format. I don’t try to sound uppity or like a know-it-all. I try to make it so that you can understand no matter what your educational level, your work experience, your life experience.
Eric Rosenberg:
Awesome. Thank you so much again for spending the time with us today. Everyone, I encourage you to check out all of what Eric has to say at his sites. He is a wealth of knowledge. And thank you so much.
Eric Nissel:
No problem. Happy to be here.
Eric Rosenberg:
Well, that was a fun one. I always love getting a chance to talk to Eric. He is such a wealth of knowledge when it comes to how small businesses should manage their accounting and income going up and down. And he really focuses primarily on small businesses with just one person. So those gig workers and freelancers have a great fit with Eric. And when he is speaking about income going up and down, it applies to hourly workers as well. It affects a lot of us in this economy.
So thank you all for sticking around and listening to the end. And remember, if you want to put money away automatically every payday, the Payactiv app2 has that feature built right in. All you have to do is click a few buttons or tap on your phone or tablet screen a few times and you’ll have that automatic savings set up. So if you do have a down month, you have a little bit of a savings cushion or an emergency fund to fall back on. Thank you all so much and we’ll talk to you next time. Until then, keep on living that life you’ve earned.
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