5 Tried-and-True Strategies for Saving When Your Income Isn't Consistent

Sarah Winfrey — Wed, 06 Apr 2011 10:24:07 +0000

If you’re a freelancer or a contractor, then you know that work seems to come in “feast or famine” cycles. One week, you have more to do every day than 24 hours could possibly hold. The next, you’re twiddling your thumbs.

Unfortunately, living with this cycle means that your income isn’t consistent, either. In fact, if you’re not careful, you can end up without enough to cover food or rent when, just last month, you could have paid for it all several times over.

To make up for this wave-like income cycle, it’s important that people with inconsistent income learn to save. This means that you’ll not only be protected if the checks don’t come one month, but that you’ll be able to have money for retirement.

While saving when your income is inconsistent is hard, too, there are ways to do it effectively. Some of these are new, while some have worked for independent workers down through the years. (See also: 3 Invisible Savings Tips That Work)

1. Save a portion of each check

Pick a percentage, and save that much of any check you receive, no matter how small. Sure, 10% of $100 is only $10, but 10% of $1000 is $100. Over time, even the little bits will add up until your savings is significant.

Pros: You’re always saving. As your business grows and you get more and more checks, your savings will grow, too. Over time, this becomes almost mechanical, and you won’t have to think about it.

Cons: If you’re struggling to live from check to check, this might be impossible right now. In that case, make it an ultimate goal to work towards.

2. Save half of all your large checks

Don’t bother saving when you get small checks, but save 50% of each large check that you get. Of course, you’ll have to determine what qualifies as “large,” and then stick to your plan.

Pros: When you get large checks, your savings will grow significantly. You'll feel like a saving god.

Cons: You don’t get to spend nearly all of the large checks you receive. Also, if one large check is the only check you get in a month, it might be hard to part with half of it.

3. Save first

No matter how you choose to save, put money into your savings accounts (or investments, IRAs, etc.) first. That way, you don’t risk spending it before you realize where it’s gone. This is especially important when income isn’t consistent, as you’ll be more tempted than ever to hold on to the money that comes in, just in case.

Pros: You make sure your savings gets its portion. This is also good for self-discipline in general, as it helps you defer gratification.

Cons: When bills are pressing, it’s hard to discipline yourself to save first. And if you have more bills than money, then it doesn’t make sense to put money in savings, only to move it directly back to the account you’re spending from.

4. Automatically round up and save the difference

This program started with Bank of America’s Keep the Change program. Basically, it automatically rounds all of your purchases up to the nearest dollar and deposits whatever isn’t necessary for the purchase into your savings account. If you don’t want to sign up with them, you can do this yourself.

Pros: Savings is automatic, so you don’t have to think about putting money away. Thus, you generate savings even when money is tight, and you don’t have to put your savings away as a lump sum.

Cons: It will take a while to generate a significant savings if this is the only way you’re attacking the problem. It can also be a tedious process if you’re trying to do it yourself.

5. Set savings goals

No matter how you choose to save, it will help to set some savings goals. This will give you a target, and you’ll be able to judge your success or failure easily. Decide how much you’d like to have, whether it’s for a vacation, an emergency fund, or your car replacement fund, and write down the amount somewhere where you’ll remember it and see it often.

Pros: You have motivation to save. You know where the money you’re saving will go, and what you’ll be able to have once it’s all there.

Cons: When you income isn’t consistent, it can be hard to know what a reasonable savings goal is. While you can work towards any goal slowly, it might be more frustrating than motivating if you aren’t able to get where you want to go.

How have you successfully built up a savings account when income wasn't consistent? What worked for you?