Planning Household Expenses with Fluctuating Income

Leo is usually a very confident person, but a change of career path suddenly makes him nervous.

He recently had the opportunity to be an entrepreneur, but he didn't want to lose the security of a steady salary and other benefits that come with being an employee in a multinational company. The biggest issue is how to manage the family finances given an irregular income. As a breadwinner who is responsible for providing for his children and wife, he is concerned about managing fluctuating income as an entrepreneur. 

LiveOlive asked several people who have successfully made this transition from having a stable job to being an entrepreneur, and here is what they say. 

Clear separation of business account from family accounts 

Novie, a 34-year-old mother of two, has been managing her family's irregular income from her entrepreneur husband for about ten years. As a rule of thumb, she said it is not a good idea to merge between personal account and business account. 

“A friend of mine often sell her assets whenever she needs capital, or mortgage her business when she needs money for family matters. Later I found out that she didn’t have clear separation on business financial and family financial. It’s like robbing Peter to pay Paul, uncontrollable,” she said. 

It is critical to open a business bank account, no matter how small your  company is. 

Put obligations as top priority 

This is non-negotiable and refers to items such as production and operational costs. This must be allocated as soon as down payment is received. Never procrastinate! “Long time ago I broke this rule and failed to pay, that I had to borrow money from parents  and relatives. It was awful," said Novie.  

Put regular expenditure as the next priority 

Next comes funds for regular expenditures such as daily expenses, school and courses tuition fees, and insurance. “I have a list of bills with each due date and set alarm in my cellphone’s calendar so that I will not miss it. And then I use envelopes for each allocation. This is an old-fashioned way but the most effective for me," said Andi, 33, a father of one child who has been an entrepreneur for seven years.   

biasakan menabung uang di awal bulanSave more, not less 

Yes, it sounds boring, but it works. Saving for an emergency fund, your next project, capital, vacation fund, a wish-list, or the next dream. According to Novie, saving actually prevented her from going into debt.  

“I had enough with personal loans that have high interest rates. I have also lived without credit cards for years because I don’t want to be tempted with promotions they offer. The beginning of the year is usually slow for our business, so we live on our emergency fund. At least we can survive for a couple of months without income,” she explained. 

Read also: 5 Essential Money Tips for Entrepreneurs

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