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Inconsistent Income Series: Setting Financial Goals


During our inconsistent income series, we’re tackling the issues that people with irregular pay face in their financial lives. Today, we’re going to cover how to set financial goals as someone with a lumpy income - and how to set yourself up to achieve them.


Determine the Life You Want

Setting financially-motivated goals with lumpy income is challenging. Goals that require a big spend, like buying a house or living an exciting retirement, seem impossible to reach when you’re not even sure if you’ll be able to cover monthly expenses with your next paycheck. Lumpy income is increasingly common in our world. Between more and more companies moving toward a commission-based salary structure, and a growing number of people entering the “gig” economy as freelancers, entrepreneurs, or startup founders, irregular income is quickly becoming the new normal.

Although there are several ways to insulate yourself against the financial “low” months that you’ll face with your irregular income, one of the best things you can do to get a jump on your finances is to start setting goals for yourself.

Goals are key motivators, and help to push us toward positive behaviors. This holds true for most things in our life - from diet, to exercise, to work life balance. Your personal finances are no exception. Having financial goals, even with irregular income, can help us to look ahead, plan for the future, and make good financial decisions now that will benefit us in the long run.

The first thing you need to focus on when setting financial goals with a lumpy income is to determine the life you want. If it helps, grab a pen and paper to start jotting down some ideas. Some things may be concrete:

  • You’d like to pay down your student loans.
  • You want to own a house in a neighborhood you’ve always loved.
  • You want to retire early.

However, you may find that some of your goals are less definable:

  • You want to feel financially secure.
  • You want the freedom to engage in your hobbies, and to spend time with friends and family whenever you want.
  • You want to travel more often than your current work schedule and paycheck allow.

As you set your goals, make sure they line up with your values. Arbitrary goals, like, “I want to have X in savings by the end of the year,” often are tough to stick with because they aren’t based in something that intrinsically motivates us. Instead, rephrase arbitrary goals to be value-driven. Following the previous example, you could say, “I want to have X in savings by the end of the year, because that’s the amount it will require to quit my full time job and start the full time consulting business I’ve been dreaming of. X is the equivalent of 6 extra months of living expenses on top of my emergency savings, and seed money to build a website and invest in the software my consulting business will need.”

Defining the life you want, both right now and in the future, can help you to begin building toward concrete financial goals for yourself - even with a lumpy income.


Create a Budget That Has Your Goals in Mind

Have your goals lined up? Your next step is going to be creating a budget with those goals in mind. When you have irregular income, it can be challenging to build a budget. However, there are a few things you can do to get started:

  • Choose your expenses based on your lowest income month. Although it’s tempting to live a lifestyle that matches our “best” months, when you have a lumpy income that strategy could hurt you in the long run. Play it safe instead.
  • Allow for some celebration. Cutting miscellaneous spending cold turkey can be uncomfortable, and a possible recipe for failure. Instead, budget in celebration and “fun” spending. This small amount of flexibility allows you to live a life that inspires you now so that you can continue to be inspired to save for your future goals.
  • Consider “paying yourself” each pay cycle. Instead of using all of the money from each of your actual paychecks, set up a separate account for your official paychecks to be deposited into. From there, “recreate” yourself a paycheck that covers all of your expenses, including savings and debt payment, through the next pay cycle and deposit that into your personal checking. Any extra from your actual paycheck can be saved for months when there isn’t enough to cover all of your expenses.
  • Adjust regularly. If your budget isn’t working, don’t be afraid to adjust and try something new. The key is to find something that balances responsible saving with paying your living expenses and giving you enough wiggle room to enjoy life. If you find you’re struggling to stick with it, consider asking your financial planner what you can adjust or improve.


Set Realistic Expectations

It never hurts to dream. However, when you set unrealistic expectations for yourself and your finances, you set yourself up for failure. The more you miss your goals, or fail to make the progress you were anticipating, the more likely you are to fall off the bandwagon. It may start small - you might skip your usual deposit into your retirement account one month, or maybe you stop putting extra money toward your student loans. Pretty soon you’ll find yourself coming to a grinding halt, and it’s tough to bounce back.

Try to balance your big dreams with realistic expectations for your progress. This may mean adjusting your timeline to achieve specific goals - like becoming debt free. It may mean you play the long game when it comes to saving, as well, in order to make it more comfortable to consistently save month to month. If you’re struggling to set realistic expectations for yourself, or are feeling disappointed with your lack of progress, a financial planner can help you determine what challenges are blocking you from success and build a plan that takes your current financial situation into account while helping you move toward your goals.