Most of us are lucky. We’re paid every week, every other week, twice a month, or monthly, and this makes it easy to make ends meet each month.
Some of us, however, live different lives. Freelancers, for example, are paid on a highly irregular schedule. Many graduate students receive only stipends three or four times per year. During the gaps between these payments, there’s a great challenge to make ends meet.
We live with a foot in both worlds. I’m basically a freelancer, so I’m paid whenever income opportunities come along. My wife has a very steady job with a steady paycheck. Our solution is simple: we use her income to make sure the regular monthly bills are covered, and my irregular income is often used to save for our big goals and to pay things off much faster.
What would I do if Sarah became unemployed, though? How would we survive if we had income arriving less frequently than once a month – or perhaps far less frequently?
Here are some of the tactics we’d immediately put in place to handle such a situation.
First, my irregular income would no longer go straight into my checking account. Instead, I would deposit all of my income into my savings account, preferably not at my primary bank. Why? I would not want easy access to those large sums of irregular money. Knowing that I had a lot of money in my account would make it easier for me to justify purchases that aren’t really justified.
So, I’d likely open up an online savings account at another bank and make sure all of my initial deposits went there.
Second, I’d set up regular automated transfers from that savings account into my primary checking account. I would effectively treat these automated transfers as my “paycheck.” I’d likely schedule about two a month and the amount would be enough to cover my bills, a little to spend as I saw fit, and a little left over to keep as an emergency fund.
Obviously, the big question here would be how much I actually spend each month. Budgeting would become really important, as I’d need to know how much I needed for bills, how much I would spend on other things, and how much I would want to save as an emergency buffer.
Third, I’d make sure that I was always withdrawing less than I was putting in to that master savings account. That master savings account must never run dry. In fact, over any given period of time, the balance of that account should be moving upwards. Doing this would ensure that I wouldn’t be going broke any time soon, no matter what was happening with my employment.
That extra money serves as something of an emergency fund hedge against unemployment or a big drought between contracts. It can also serve as a very nice bonus for a future time when your financial life changes – you graduate, or you find some sort of long term contract.
Finally, I would tend towards hyper-frugality. That is, until I was very sure that I had a decent money buffer up against unemployment or other events. I’d live in a tiny place, have roommates (if at all possible) to share the rent, and seek out every free service I could.
This is what many graduate students that I was friends with back in the day did. They would eat at every possible free meal, lived with several other students at once, and often potlucked as much as they could. Their entertainment was often purely from the internet or found in a deck of playing cards.
Of course, it’s key to remember that such situations are often the “salad years” for a career that will grow into something more steady – and perhaps more lucrative. Graduate school is preparation for work that requires a higher degree. Freelance work often builds into something much more. Often, this situation is temporary (though temporary can mean many years, sometimes).