4 Steps to Creating a Money Plan With Fluctuating Income
When it comes to the money in your bank account, there are only two factors: money coming in, and money going out.
For actors, freelancers and creative business owners, the “money coming in” piece can’t be calculated like a biweekly paycheck can (you can make estimates, of course, but you will never be able to predict with 100% certainty).
This isn’t a bad thing, though, because you are 100% in control of the second factor: money going out. You can plan and decide what’s going out with 100% certainty while stacking your savings accounts to act as a buffer when life throws you a curveball.
You can create a predictable and steady money plan, even with fluctuating income.
Here are the 4 steps to create a money plan with fluctuating income:
1. Find Your Baseline
Your baseline number will be the foundation of your money plan. Your baseline is the amount of money you spend living your normal life each month. It consists of two different categories: bills and flexible spending.
Your bills obviously include your rent, utilities, phone and insurance, but it also includes anything in your life that is on autopay (Netflix, cat food subscription, Spotify, clothing rental company, etc.). Make a list of all these things, add up the costs and that number is the first half of your baseline.
Your flexible spending includes anything you’re swiping your card for throughout the month (groceries, takeout, drinks, gas, coffee, shopping, show tickets, etc.). Look at the last three months of your credit card or bank statements and find the average amount you spend on these things. Use the spending data you find to decide on a flexible spending number that feels reasonable to you. This is the second half of your baseline number.
Bills + flexible spending = baseline number.
2. Organize Your Bank Accounts
Having just one checking account is a breeding ground for confusion and anxiety. You’re having to do mental math about what autopayments have gone through to figure out how much you can spend, you don’t actually know what’s coming in and going out on a monthly basis and your decision to move money into savings is random and based on whether you feel safe enough to do so.
I want you to have three separate checking accounts: one for your income to be deposited into, one for your bills and one for flexible spending.
At the start of each month, you will use the money that’s accumulated in your income account during the previous month to fill your bills and flexible spending accounts. The rest will be put elsewhere (we will get to this in number three, “Implementing a Surplus SOP”).
You will use the baseline number you calculated in step one to decide what amounts you will transfer from your income account to your bills and flexible spending accounts each month (see the example at the end of this article).
When you separate your money, it makes it easier to manage and removes the need for a spreadsheet or budget. No more mental math is needed because all your autopayments are taken care of in a separate account. All you have to do is check in on your flex spending account once a week to see if you’re on track with what you planned to spend that month. And because your income isn’t disappearing into the abyss of one checking account, you can move more into savings.
3. Implement a Surplus SOP
During a month when your income is more than your monthly baseline, you want to have a plan for how that money will be used. Having a plan for the extra money you’re making will remove the “I’m making more money, but where the heck did it all go?” energy.
Create a list of all the things you want to do with the extra money you bring in – this is called a Surplus SOP (part of the Money Flow Method created by Not Starving Artists).
One of the things on this list will be filling up your off-contract buffer. This is a savings fund that you will fill up during your high-income months to buffer you during your low-income months (when your income dips below your baseline number).
The rest of your Surplus SOP list will be specific to you – do you have a friend’s wedding and bachelorette party you need to save up for? Are you paying off credit card debt that you’d like to throw extra money at? Want a headshot refresh in the near future? Ready to start investing in a retirement account? Have your eye on an audition bag you want to splurge on?
This will help you think proactively about what types of things you will need money for in the future and allow you to actually put money towards those goals.
4. Have a Weekly Money Date
Now that you have the template for how to create a money plan for fluctuating income, you need to set aside time to actually implement it.
Schedule a standing weekly appointment to hang out with your money (i.e. Sundays at 11 AM). Make it a priority on your calendar just like self-tape time, acting class and workouts.
The most important thing about Money Dates is that you make them FUN, something you look forward to. Take yourself to your favorite coffee shop (making sure you have secure Wi-Fi), put on a 2000s throwback playlist and pour yourself a glass of wine or play some jazz while you sit on your porch with a cup of tea – whatever gets you excited!
TLDR:
Find your baseline number (the average you spend on living your life in a month). Split your money into three different checking accounts: income, bills and flexible spending. When you have months in which your income exceeds your baseline, the extra money will get put elsewhere (off-contract buffer, an upcoming vacation, a new headshot fund, retirement, etc.). When you have a month where your income dips below your baseline, you will pull from your off-contract buffer fund so you don’t have to go on a ramen diet until your next gig hits.
Example:
Your monthly bills are $2,500 and your average monthly flex spending (groceries, coffee, tickets to shows, etc.) is $1,000 – this means your baseline number is $3,500.
Last month, your income was $5,000 from the play you’ve been performing in. You transfer $2,500 to your “bills” account and $1,000 to your “flex spending” account.
You have $1,500 leftover – this is your surplus. You run through your Surplus SOP, putting $1,000 into your off-contract buffer and $500 into the savings fund for your best friend’s wedding coming up.
Fast forward to next month. The play you were in has closed, and you booked a small commercial alongside your virtual assistant job, giving you $3,000 of income for this month.
This means you’re $500 short of your baseline. You take $500 from your off-contract buffer so you can fill your “bills” and “flex spending” accounts with their full amounts.
Fluctuating income. Consistent lifestyle. Steady money plan.
Your lifestyle doesn’t have to fluctuate when your income does. Your inconsistent income doesn’t have to mess up your money plan. You can save, invest and enjoy your money without a biweekly paycheck – you just need the right system.
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Brooke Tyler Benson, Money Coach + AEA Actor, is the founder of Not Starving Artists. She is bringing financial education and empowerment to creatives to create a new generation of wealthy artists living lives of luxury and purpose (no budgeting or bi-weekly paycheck required). After graduating with a BFA in Acting, it became her mission to destroy the “starving artist” trope once and for all. She is your financial cheerleader, bringing you accessible money education and coaching specifically for creative freelancers and small business owners.
