How to manage your finances when your income varies from month to month

  • February 23, 2017
  • Stephanie Lai

One of the most difficult things about being in real estate sales is dealing with the seasonal highs and lows. So, are you left to ride a cash flow roller coaster year after year, or can you do something about it? That’s what we asked Investors Group’s executive financial consultant Glenn Gaudet, who does work with self-employed clients. You dont have to feel the financial punch of low seasons, he says. Here are some quick and easy ways to ensure your money will get you through the slow months.

Have a three-month nest egg.
That’s the minimum you should have saved up, says Gaudet. Add up your monthly expenses and discretionary spending and save up at least three months. Not only will that have you covered for your month-to-month bills, but it will also help if a financial emergency comes up, like, say, you have to take a personal or medical leave or you have to get a new car. “What I suggest to clients is to put that money into an account or investment account, and then every week we take out a ‘salary’ to pay your bills,” says Gaudet, adding that an investment account can be conservative, not something that’s high risk. “Don’t put your income into a regular bank account though. It’s just too easy to move money around and spend it.”

Make sure your debt is low interest.
If the holidays were tough on your wallet, Gaudet says to move the debt off your credit cards and onto a line of credit. “This will consolidate your debt onto a cheaper interest rate.” Just don’t run the risk of running them up again. “Always pay off your credit card.” Credit card interest rates can go as high as 20 per cent, especially if you use it for cash advances. Whereas typical line of credit interest rates have recently been sitting around five percent. This means if you have $10,000 in debt on a line of credit, the interest after your first month will be $41.67, versus $166.67 with a credit card. Use your business credit card for the benefits and not as a money loan, whether it’s flight miles, savings on gasoline or even cash back. Gaudet says to create a monthly calendar notification for the date your credit card payments are due. “You don’t want to have credit card debt,” he says.

Make your money work for you over the long term.
While you might now be concerned about the slow times of the year, you should also be thinking about another time when you won’t be making money – when you retire. Because you are “self-employed,” Gaudet says to be smart about your savings and think about the long term. Create another savings for retirement, with RRSPs, investments or a high-interest savings account, such as a tax-free savings account.

Don’t get overwhelmed.
You can research the best way your money can work for you. Part of that can be talking with a financial advisor about what your options are. “You don’t go to the Internet every time you feel sick because it’s going to scare the heck out of you … there is a lot of wrong information out there,” says Gaudet, adding that it’s the same with online financial advice. “Find someone you can trust and who is a certified financial planner.” Because regulations and the market are always changing, someone who is up-to-date on his/her courses and training will be best able to advise you.

Everyone has to save, and you’re no different.
“It doesn’t matter how much you make; you have to save money,” says Gaudet. “I have clients who make $250,000 a year who struggle to save because they spend so much, and I have clients who make $60,000 and are doing alright because they know how to save.” Just because you have a successful year, doesn’t mean you shouldn’t worry about the low times. The market is fickle. Things change and you need to be prepared for any situation. “You will not be financially successful in your lifetime if you do not save money.”