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Something every investor should do before trading in the stock market is establishing a budget.
Not only will a well-constructed budget allow for you to make more and better exchanges in the long-run, but it will also work as a safeguard against any potential bad investment. In addition, it serves as a way for all investors to successfully track down their spending, figure out where their money is actually going and where it could be going instead.
Making a budget is an activity that can vary in difficulty depending on how your current income flow works. Those with jobs that deliver varying income levels with every paycheck will most likely notice this struggle more often than others.
Having a steady income every month is easy to work with when calculating a stable budget, but an unstable one brings out a need for every month’s calculations to be different from the last.
If you don’t know what next month’s payment will look like, then all calculations would also have to be based on assumptions.
That makes it difficult, but not impossible. Here are some tips for creating a successful budget with a variable income.
Use your lowest possible earning as a reference
One should never spend more money than what’s being earned. And having a budget is a helpful tool to keep these criteria in check.
But how can one spend a lesser amount of money out of a still unknown amount?
Easy, find out which is the lowest-earning amount you could receive in the current month, and then use it as a basis for your budget.
Keep in mind that this is not to say that you should expect that same amount to be a reality. That’s just for you to assume for any budget-related purposes. Expect the best, but prepare for the worst.
Working with this type of budget, once your paycheck is at hand, you can easily save any extra difference from your initially assumed amount afterwards.
Feel free to review and make changes to your budget
As time goes by and your projects increase both in quantity and scale, it is more than likely that your lowest earning expectations change as well. Alternatively, outside circumstances might also have an influence of their own in the matter.
Feel free to review your current budget calculations from time to time and make adjustments if necessary.
Best case scenario, your spending could have a bigger opportunity for necessary expenses, or even personal spending, while still working on saving money in the long run. Worst case scenario, you have to make more strategic decisions to reduce your expenses but are still on a path to maintain a money-saving habit.
In short, try and make sure your budget always reflects your current situation, and you’ll soon see a difference in your favour.
Draw a line exclusively for savings
Some people save money out of whatever amount was left after making a shopping spree. However, the act of saving money can and should aim for more. You should try and budget your savings as well.
How? Draw a line on how much of your earnings should straight up go to your savings from the very moment you receive your paycheck. Try to keep this up consistently, and try to keep yourself on track as much as possible, too.
By doing this, you allow you to make more significant expenses easier in the future and build your safe spot for that rainy day that might come unexpectedly.
Likewise, feel free to move said line to reflect the current situation. Maybe it can be bigger when on a winning streak or lower when facing hard times. Make sure it is an amount you feel comfortable separating from the rest.