How to kill bills with an income that varies

By: on 2019-03-15
Ask Phil Bradford
Even with a steady income, your bill payments may become a burden at times.

Here we are talking of a variable income, where things will get more deep to swallow.

To be honest and practical, there’s only one clean solution, plan a good budget! Only then you can pay off bills on a variable income seamlessly.

Before I breakdown this article, let me introduce you to 2 types of expenses. If you can start to decide your expenses accordingly, you will see, things will fall into place pretty easy.

Fixed expenses:

These are the highest of all priorities. These won’t change even if you want to reduce them. The examples are pretty obvious, like your mortgage payments, insurance, auto loan payments, any student loan that you have and so on.

These expenses are inevitable mandatories. Figure out your fixed expenses and make a list of them. It’s going to come handy afterward.

Variable expenses:

These are surely important but depends on your lifestyle. These are your electric bills, grocery bills, transportation costs, clothing, etc. You can definitely optimize them as per your needs and wants. Again, make a broad list of these expenses, and calculate where you can shorten it a bit, and which needs some special attention.

Scenario - I [Variable income, but there will be income every month]

Part- I

Now that I have discussed two types of expenses, let's have a brief outlined talk about your earning.

In your case, it is a variable income. You are not quite sure about your paychecks. Some months you are earning gold and some months you are getting nickels.

Our first concern should be to track the income first.

Now how to manage a variable income? I would say, you need not worry about your per month income. Here the calculation will become a bit broad.

You got to sum up your income from now, on an annual basis.

The calculations are going to be tough. So get a calculator, and sit down with a pen and paper.

See, let me be practical about one thing. To find suitable solutions to pay your bills on a variable income, you need to start budgeting one year ahead.So, if you budget this year, next year will be smooth for you to pay your bills!

But yes, your condition will surely improve in the meantime though.

Go back years from now to the time you started your career.

Calculate how much you earned in your year of lowest income.

I am saying this, because I want you to consider the worst case scenario, to be on the safe side.

Since I am writing for all, I will take the average annual income of a US citizen as my example.

As per the recent stats, it will be $60,000 per year.

Average fixed expenses might be rounded up to $20,000. These will include your mortgage, rent, insurance, other loans and whatever.

Average variable expenses can be $30,000. I am excluding luxury expenses here. So, buying that Macbook, the PS4, or the cushioned cane sofa, will not be counted. Factor in your utility bills here which you can somewhat regulate by changing your lifestyle.

As you can see, $50,000 is the total expenses that are happening in a year.

What you will do is, you will calculate the average expense per month.

It’s simple, just divide the total expense by 12. It’s about $4000 per month.

So by hook or crook, $4000 should be there in the bank vault each month. This will cover all your expenses including utility bills, loans, and insurances.

How to play the game:

Hope you remember this line, “Rome was not built in a day.”

Same here.

You need to struggle for one year to make your financial status stable for the coming years.

So the goal is to save at least $4000 by the start of the next year. The recommended savings is $8000.

That’s the case for a citizen with an average annual income of $60,000 and with average expenses reaching approx. $50,000 annually.

In your case, the numbers could be lower or higher.

So the purpose is to save at least next year’s 1-month income, within this year.

Once you do this, you will get one month’s head start for the next year.


Now let's go to the future.

Say you are at the beginning of a new year, with a minimum of one month’s income in hand.

How do you feel?

A sense of relief?

That’s what we are talking about.

If in the first month, your income is $2000, you can straightaway pump this amount to savings, and spend from the $4000, you already have.

If business is running low and you get the same $2000 next month, then this time you got to budget a little and try to save some dollars.

You can try out the zero-sum budgeting.

Forcefully assign every dollar of yours a purpose. The top priorities should be fooding, transportation, cell phone plans, internet, electricity, and all you can’t actually do without.

Whatever’s left, pin down to savings.

Cut short the expenses wherever you can.

The Summary:

Make a proper listing of your expenses from your needs to wants.

The main art of paying bills on a variable income is to break down your expenses as per priorities.

Continue to pay for your expenses each month as much as 90% of your income permits.

At least 10% should be pushed towards savings if there are no questions of penalty and liabilities.

If you are still left with few payments to be done after you have nothing left of your income, don't worry, start doing your payments next month from where you left off this month.

Scenario II [What if you have income for half of the year or seasonal]

It’s the same theory as before.

Compensate the remaining no-salary months from the total income you do, say in 6 months, 8 months, or 9 months.

Your savings will matter here the most.

Make enough savings during your income days, and get hold of a net income distributed throughout the year.

More tips to pay off bills:

  1. Try to make a decent income, even if it’s variable. The desired amount is above $60,000 annually.
  2. Have multiple savings accounts, to tap into in times of necessity.
  3. For one year, try to make unnecessary expenses as low as possible.
  4. Always have at least one month’s financial head start before the start of a year

Last Updated on: Fri, 15 Mar 2019

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