My Variable Income

Hi Barefoot.

I like your stuff and follow it pretty closely. As a result of that, and some hard work, we are doing okay.

We have just started our own business, but because we’re starting out we don’t draw a wage for my husband, so my job pays the bills. We’re making money on paper, though cashflow is a killer. I get the idea of your 60/20/20 rule when there’s a consistent income --- but where on earth should we start when one of us is self-employed?

Nikki

Hi Nikki,

Fantastic question!

The 60-20-20 Rule involves screwing down your living costs to 60 percent of your income and then devoting 20 percent to savings and 20 percent to splurging.

And you know what? It’s actually the perfect plan for people on a variable income.

Why?

Well, you may not know how much money you’ll earn, but you know how much you have to spend to keep the lights on and beer in the fridge. Your business needs to cover that figure, and your superannuation, as a minimum. If it’s not, make changes in the business until it does, or, if it’s never going to happen, get out of the business.

When you earn more than your basics, plough that money into your savings. As a small business owner myself, I have three months of personal living expenses and three months of business expenses sitting by. Being your own boss can be brutal -- so stack the odds in your favour.

Scott