If you’re a freelance worker, an independent contractor or an hourly employee, you never know exactly what to expect from your schedule. Maybe you’ll have one more project next month, or maybe you’ll be assigned fewer hours. That uncertain workload on your plate translates to an uncertain amount of money in your pocket.
In the midst of the financial challenges of COVID-19, those uncertainties are feeling even more overwhelming as many households feel the sting of smaller paychecks. An April report from the Pew Research Center revealed that 43 percent of U.S. adults or someone in their household had lost a job or taken a pay cut. Some individuals have been hurting more than others, too. A survey of more than 1,400 gig workers conducted by AppJobs found that nearly 90 percent of respondents were looking for new sources of income.
If you have an irregular income or if the pandemic has created problems for putting money away, here are eight ways to make sure that saving can be a regular part of your routine.
1. Calculate your bills
Before you can start saving, you need to know how much you’re spending and create a budget based on your irregular earnings. Peter Bielagus, financial speaker and author of three books on money management, says that anyone who cannot control their income should focus on controlling their expenses.
“You have fixed expenses where you get a bill each month, but you also have variables such as going out to eat and buying clothes,” Bielagus says. “Try to turn those variables into fixed [costs] by giving yourself a set spending amount for each of them. Then, it’s a bit easier to deal with the ups and downs on the income side.”
2. Consider zero-based budgeting
If you want to find ways to save more dollars, you might want to give every dollar that comes into your account a job. That approach is commonly known as zero-based budgeting, and the goal matches the name: Get your budget to zero during each budgeting period. For example, let’s say you make $3,000 this month. With zero-based budgeting, you need to think about where all of that money goes down to the last dollar. You’ll divide it among your fixed expenses, your fun costs and your different saving goals until there is nothing left.
Next month, you start over. No matter what you make, you’re still operating with that final tally of zero. It requires extra work and extra focus, but it can add up to a meaningful difference for your savings.
3. Build a buffer
Bielagus says that anyone with irregular income should build what he calls “a buffer fund.” It’s not an emergency fund — although he says you should have one of those, too — but it’s a chunk of savings that you can count on if you encounter slower periods of work.
“You have a flat line of expenses, and an income line that goes up and down,” Bielagus says. “If the income goes below the expense line, you can pull from the buffer account.”
Bielagus says that it’s important to replenish that account when your income picks up. The size of your buffer account depends on what you do for a living. For example, Bielagus points out that an Uber driver might have a slow day, but he or she can work longer to make up for the small earnings. In other jobs, though, it might be more challenging to create more income quickly.
4. Make withdrawing difficult
Your savings account will not grow if you think of it as an extension of your checking account. Bielagus recommends putting the buffer account in a separate bank account with a “hard-to-get factor.”
“By keeping it in a separate account, withdrawing money will be a conscious decision,” he says. “That hurdle makes it harder to spend.”
For example, if you put money in an online savings account, withdrawals might require an online funds transfer that takes a few days or something even potentially longer, like a wire transfer or a check request. This extra step can force you to think twice before accessing your money.
5. Make savings a default setting
While taking money out should be challenging, putting money in should require no work whatsoever.
“Automate your savings as much as possible,” Bielagus says. “Even having one account transfer $20 each month to your savings account is a great place to start to turn irregular income into a regular saving routine.”
6. Use a tech tool to help with your short-term and long-term goals
Your bank account probably lets you automate your saving, but there are plenty of other solutions that can help you elevate those automated amounts. For example, Digit, a $5-per-month platform, operates on an algorithm that identifies when you have opportunities to save more money.
“The algorithm is built to learn your income, steady or not, and your spending habits over time,” says Jenna Tunick, product marketing and consumer advocate at Digit. “It’s working in the background all the time.”
The algorithm aims to optimize your savings by identifying when to move money into a separate account. By default, Digit members have a rainy day fund, but they can also create custom goals for everything from buying a car to having a baby. Since the platform was founded in 2015, nearly 120,000 members have collectively saved more than $88 million for home-buying goals, and nearly 20,000 of them have managed to put away more than $7 million for college.
In addition to those long-term goals, Tunick says that Digit sends SMS notifications, which she says can be very helpful for freelancers and hourly workers.
“Most of our members receive them daily,” she says. “We’ll send you your checking balance update every morning. It helps people have that understanding of where they are currently so you can make good decisions that day.”
Other tools – Steady, Chime and Qapital, to name a few – all offer tech-based solutions to better money management.
7. Save for your taxes, too
With an irregular income, you still have to pay a regular bill to the government. Part of your savings plan should include those expenses to avoid any surprises. Bielagus recommends a separate bank account for setting aside money to pay the government.
“Set aside somewhere between 20 and 25 percent of your earnings,” he says. “By taking that percentage right off the top, you should have enough to make estimated quarterly payments and avoid any penalties.”
If you don’t want to do the math, you might be able to open a bank account that will do it for you. Some banking services such as PNC’s indi have been specifically designed for workers with irregular incomes to help calculate estimated taxes.
8. See if someone else is saving your cash
Trying to find more money to add to your account? You may have some cash with your name on it – literally. Bielagus advises people to visit the National Association of Unclaimed Property Administrators’ website at unclaimed.org. The directory includes a state-by-state guide to search for everything from unreturned security deposits to inherited life insurance policies. Each year, states return more than $3 billion worth of unclaimed property.
Having an irregular income means that you might have some unexpected open hours and open days on your schedule. By identifying ways to save more money when you are working, you’ll be able to enjoy those breaks instead of stressing about when your next check will arrive.