We’re learning how to make the most out of your income. Kathy Sweedler gives us some tips in Your Money.
Time to Look at Your Income Closely
What does your income flow look like? Do you have more than one source of income? Understanding our income – and its peaks and dips – can help us plan.
Research shows that many people’s income is very different month to month. And, this can make creating a spending plan difficult. It can also make it difficult to have enough money at the end of the month for all expenses. One research study found that for more than five months a year, the average family’s income was either 25% above or below their median income.
How much income do you have each month?
One strategy is to divide your gross annual income – which is on your income tax forms – by 12. That will tell you your AVERAGE monthly income.
But, it may be more helpful to know how much income do you have in October, and how does that compare to what you have in July? If it’s different, knowing that can help you plan.
One of my favorite financial management strategies that I share with people is the usefulness of tracking their monthly expenses in order to see where there money is really going. I’m now adding “track your income” to my money management strategies! Or, estimate what you think your income is the different months of the year.
How can you balance income and expenses each month when income flow changes?
This will vary from household to household. Perhaps you can save more money during the months where your income is above average. Or, move some of your occasional expenses to months that you have higher income. Try to smooth the peaks and dips in your monthly income to decrease your stress and worry about finances.