Here's How You Can Still Budget If You're Self-Employed, According to Rachel Cruze
Finance expert Rachel Cruze is known for being extremely disciplined with money, advocating for people to write and maintain a budget and live below their means. While not as militant about saving money as her father, Dave Ramsey, she doesn't take excuses lightly when it comes to personal finance.
In a recent TikTok video, she called out self-employed people, gig workers and contractors who may have fluctuating income for using their variable pay as a reason for not keeping a budget.
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But beyond scolding, she offered actionable advice to make a budget, noting that she and her husband both have variable, commission-based income.
"Your numbers will probably look a little different than someone with a steady paycheck," Cruze told her followers. "You don't quite know exactly until you get your paycheck. But you can still budget."
Estimate Income on the Low Side
For starters, Cruze said, estimate your monthly income. "We do a guesstimate," she said. "I usually do a lower amount to give us some breathing room."
Track Income and Expenses
To create a more accurate guesstimate, Discover.com recommended documenting six months of income and expenses to come up with average figures. Allocate those amounts to a monthly budget.
Add Extra to Savings
Once you've written your budget, if you underestimated your income for the month, you can add this to your savings fund, Cruze advised.
Have a Plan To Make Up for Shortfalls
If you don't earn the estimated amount in a given month, you may have to cut some discretionary expenses.
"You're probably not going to make no money," Cruze said. "And if you do, you're going to have to pull from savings. You still have to pay for food."
Separate Your Income Into Buckets
Discover.com further recommended dividing up every paycheck into buckets: one for your bills that are a set amount each month, one for variable expenses and one for savings. Freelancers and other 1099 workers will also want to set aside money for taxes in an account that's separate from an emergency fund.
Stick To Your Plan
However you structure your budget, the important thing is to make sure every dollar has a purpose -- whether that's savings, paying down debt or covering expenses. This can help you feel more in control even when your income fluctuates.
"Regardless of what's going on, you can still have a plan," Cruze said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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