How to plan when your income varies

arrow-394142_1280With all the challenges families endured to survive the late 2000’s depression, many took on an income that varies from month to month. One of the common questions I receive in financial education sessions goes something like this: “My company closed in 2009. Since then, I’ve started my own consulting company. I enjoy setting my own hours and being my own boss, but my income varies from month-to-month. I want to be better prepared if there’s another downturn in the economy. I know I need to start saving. How do I set up or use a spending plan?”

If you’re a sole proprietor, it’s legal to use your personal account for your business, but it’s not a good idea because it makes it harder to create a personal spending plan. Your business expenses, including your income, would come from the business account. This also makes tax time easier.

As for setting up your spending plan, average your income over the past 12 months. This will give you a projected average cash flow. Some months you will have more income and others, less. You plan your spending based on this average amount. That plan should include saving any extra for the slim months that can occur.

Even though it’s important to be positive about your opportunities for higher income, it is wisest to plan for a worst case scenario. After a year, do a new average to project a new average cash flow. A spending plan can and should change and evolve over time.

Personal Income Tax Preparation and Filing – Free webinar from Univ. of FL Extension

January  29, 12:00 p.m. to 1:00 p.m.

An IRS representative will discuss options for free tax filing, provide information about tax credits & deductions, and demonstrate IRS tools to help you with your return. Register at

Getting SMART with your money in 2015

Harzvorland südl. Halberstadt, Rapsfeld, Wander- und RadwegWith the cloudy and cold days we’ve had so far this year, I’ve been yearning for sunshine and thinking wistfully of leisure time to wander around on a spring day. As a parent. I’ve been known to say, “If you don’t know where you are going, how will you know when you get there?” to my son.

Thinking about sunshine and having leisure time to enjoy it can get you through a January. Interesting how we don’t always get as much of that time as we might like. There are times in life when wandering around may be appropriate as we figure things out for ourselves. I’m thankful my son isn’t doing that quite as much as he used to do.

But when it comes to money, continuing to wander around equals missed opportunities. It means there may continue to be too much month at the end of the money. It means continuing to pay high interest rates rather than paying off debt. It can mean putting off retirement savings. Wandering around rather than having a money plan can also mean failing to have some things we want now and being able to save and invest for long-term needs and wants.

Perhaps you have heard the phrase SMART goals or used the concept. Smart, Measurable, Attainable, Relevant, and Time-bound. The Personal Financial Management Made Easy! program can help you stop the wandering around by defining goals as well as other steps to improve your finances–even if they are already in good shape.

Learn more about the program. Enroll in it and then, get started on your SMART goals for 2015!

Tips for thoughtful giving

It’s been a wild month or two, which has prevented me from blogging. Among my New Year’s resolutions is getting back to my twice-a-month schedule.

And, as wild as it’s been, we’re right here in the midst of holiday shopping season. Since I personally prefer to focus on meaning of Christmas in a thoughtful, unrushed way, I liked a recent article from Real Simple. It shared 7 tips for thoughtful giving. I’ll focus on just three.

Thoughtful gift givers plan ahead by thinking about the recipient’s interests. Making a list of items will help you stay organized and get the right gift for everyone.

They also also get crafty. Making gifts to share adds a special touch to the holidays. Knitting, baking or filling a pretty canister with ingredients can be quite thoughtful.

When in doubt, thoughtful givers ask. If they are stumped as to what to give someone, they ask a friend or family member for suggestions.

Source: Real Simple

Bad decisions can turn financial treats into financial tricks

Halloween has passed, but any time of year financial treats can turn into tricks. Some options may seem good on the surface. But, if not handled properly, they can have long-lasting negative 7 money tricks and treatsconsequences.

The next couple of weeks I’ll be sharing a few financial moves that can work against you as shared by the National Foundation for Credit Counseling (NFCC)

  • Discontinuing the use of credit
    • Treat:Living on a cash basis means that you never overspend or pay interest on your purchases. Typically, people who pay with cash save 20 percent over those who charge their goods and services.
    • Trick:At some point in their life, most people will need access to credit. Consumers will be well-served by creating a thick and positive credit file. To do so, it is necessary to have at least three open and active lines of credit.
  • Automatic bill paying
    • Treat:Arranging for your payments to be sent to creditors before the due date means you’ll never have a late fee or a dinged credit report.
    • Trick:If you neglect to balance your check register and the automatic payment results in an overdraft, you’ve defeated the purpose.
  • Bundling of services
    • Treat:Consumers can often enjoy a significant savings if they use the same provider for their land phone, cell phone, cable and Internet services.
    • Trick:If you use the savings from the bundling of services for a larger, more expensive plan than you really need, it’s no savings at all.
  • Co-signing on a loan
    • Treat:You can help another person establish credit, rebuild credit, or purchase something beyond what they could on their own credit worthiness.
    • Trick:The co-signer and primary borrower are equally responsible for payment of the loan. As well-meaning as people are, things happen. Never co-sign on a loan unless you can afford to solely take over the payments.
  • Balance transfers
    • Treat:With a lower interest rate, you can repay the debt sooner and save the money you would have paid with the higher APR.
    • Trick:Faulty thinking leads you to believe that since the interest rate on the new card is so low, it won’t hurt to charge a few things. Before you know it, the introductory period with the low rate has expired, and not only is your original balance not paid off, but it’s higher than when you began.

Consumers should thoroughly research and fully understand the risks and benefits to any financial decision they make. Simply because an offer sounds appealing, doesn’t mean it is.

Saving for your child’s college vs. saving for retirement

As one of my co-workers says, “There’s no scholarship for retirement!”

Parents want to provide the best for their children. Saving money for your child’s education will help them avoid taking out large loans they will need to pay back later. But don’t forgo retirement saving and only save for education. Research lower-cost schools, find free money for schools, and continue to save for retirement. Remember, you can apply for grants and scholarships – or take out student loans, if your savings doesn’t quite cover the costs – but these options are not available for retirement.

And thanks to the Tennessee Promise, students wanting to further their education past high school can go tuition-free for two years of community college or technical school. But the last day for the Class of 2015 to apply is Saturday, November 1. Exact times vary for Eastern and Central time zones. Here’s more about what parents need to know from Tennessee Promise.


Buying a house vs. saving for retirement

Workers in their 30’s and 40’s may be tempted to cash out their retirement saving accounts to buy their first home. But this could be detrimental to their retirement savings. Don’t touch your retirement savings to buy a home. Instead save a portion of your pay in addition to saving for retirement. You might scale back your retirement savings to just the amount that your employer will match. Ask your bank or credit union to regularly transfer a certain amount from your checking account to your savings account.


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