Financial Independence and Irregular Incomes

Like many people who own their own businesses, creative people are faced with the issue of having an irregular income. How can you plan to save for the future when you aren’t sure what you’ll next check will be or how soon it will get here? It’s been my experience that a little planning and discipline can overcome this obstacle to financial independence.

First off, there is a difference between having income that comes irregularly and having almost no income. The former is what we’re talking about today, let’s say your an entertainer who has a lot of work, but you might get paid on an irregular basis.

My approach with successful artists is really not that different than with any other self employed person and the financially successful self employed folks I know. Remember you are running a business. It’s so easy to get so absorbed in your job, in running the business, that you can forget to make good business decisions.

The biggest mistake, in my experience, that self employed people make is refusing to pay themselves. When a business begins it’s not uncommon to plow everything back in, to constantly invest in the business. At some point, for a business to be successful, it has to support you, not the other way around. I know this might be hard to imagine, so I am going to give you two ideas that you can start to do today to get a handle on things.

The first one is going to be something you might resist or even flat out refuse to do and I’m going to ask you to try it for a month. There is a temptation to spend a lot of money when you have it  and regret having spent it between pay days. You can’t run a business by making decisions based on your current checkbook balance. It’s easy to spend the same money three or four times when the big checks arrive. Instead, find out where your business expenses are going by writing down everything you spend. EVERYTHING. At this point, I’m not asking you to change anything, just get a handle on what it actually costs to be in your business. (If you embark on a new diet, you have to get on the scale first so you have a reference point, that’s what we are looking at.)

What we are trying to establish in this step are two things: what are my on going costs of doing business and how can I lower these costs. Like it or not, business is only business when you take in more money than you lay out, otherwise, you are a hobbyist. (And some hobbies can be very expensive). Once you get a handle on where you are spending money, it’s time to make some hard decisions. Your business, like any Fortune 500 corporation, needs a budget. You can’t advertise everywhere, you can’t buy everything you want in the name of “investing in the business”.

Step 2 is a little more fun. I want you to tithe to yourself 10% off the top of EVERY sale. Start a “nest egg” account and build an account that you don’t touch, no matter what, and pay yourself first. This is a pretty easy thing to learn to love, you’ll find that you can sometimes even raise your prices to cover your paycheck. Now, I don’t care if you are already taking money out of the business, take this in addition. This nest egg is your way to diversify, to know that if you closed your business, you’d have been building an account right along that is “your money”.

Look at it this way, if you lost 10% of your business, you wouldn’t close, you would just go out and find more business. In my experience, successful business owners from all kinds of professions have achieved financial independence by having these two disciplines built into their business. I hope you’ll give it a try.

Rick DiBiasio is a Certified Financial Planer (TM) and the Owner and Branch Office Manager of a Raymond James Financial Services office (Member FINRA) at 3704 Winter Garden Vineland Rd. Winter Garden, Fl. 34787