There has been a dizzying pace of change in the last four weeks, and many of us are feeling overwhelmed. Even with the Job Seeker and Job Keeper initiatives many of us will be using our savings to survive.
With those payments coming in dribs and drabs along with any income we can earn, the sporadic flow makes it even more challenging to adapt to the changes in our lives.
Pay yourself a steady wage
To give yourself more consistency and certainty I recommend that you smooth the amount you live off every week. This makes budgeting and determining what is affordable much easier.
- Separate your savings into a reservoir account rather than sloshing around with everyday spending.
- Direct all your income sources into this reservoir to act as a hub and buffer the flow of money.
- Pay yourself a steady wage from this account, which will give you a sense of normality and be easier to manage. Set the frequency to match your usual pay period.
Please note, this structure is only for challenging times such as when you have lost some or all of your income. It’s also only one part of the full budgeting system I recommend to make managing your money easy.
How to set your ‘steady wage’
Following are several methods to set the starting point of the amount you pay yourself, from largest to smallest.
- If previously you spent everything you earned then start with your previous net income (after-tax). However, it’s very likely you’ll need to cut your spending to make your savings last.
- If previously you regular saved then pay yourself the net amount you previously spent per pay period. An expense tracking app that categorises past transactions can help you work that out.
- The net amount you can afford to live off now to make your savings last at least 6 months or more.
- The net amount you’ll receive in combined income support.
Make the savings last
When you feel ready, the next steps are:
- Identify how to spend less and thereby reduce the ‘wage’ you pay yourself, so that your savings last longer.
- Top up the reservoir by selling items you no longer need, and by finding other income sources.
Money coaching during a career transition