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Seasonal Income has led to many challenges for our clients. We see it often as debt ‘filling in the gaps’ until repayment becomes unmanageable. It can all too quickly become a vicious cycle of debt and repayment where there doesn’t ever seem to be enough money to ‘get ahead.’
Where to begin? With a seasonal worker, it’s best to begin by focusing on expenses, not income in the budget. Expenses can be allocated into three categories or buckets: fixed monthly, flexible monthly and occasional. Consider which of your expenses is a want or a need on your budget then allocate it accordingly into each bucket. Some may appear to be in more than one bucket. For example, gasoline may be a fixed expense while you are working but will be flexible once you are not. Cast a critical eye on each category and add them all up.
With your expenses in mind, open three bank accounts, one for chequing and two for savings. Most banks do not charge fees for savings accounts. Another option is to consider an online bank with no fees.
One account, the chequing account, will be for cash expenses (groceries, gas, grooming, entertainment), and bill payment (housing, utilities, debt). The second account, a savings account, will be for irregular expenses (clothing, car repairs, gifts, children’s activities). This category is the one most often missed and debt fills the gaps when the money is not put aside.
The final account will be a cash reserve account. Money will be moved monthly as a regular amount. In the higher income months, money will be deposited while in the lower income months, money will be moved into the spending accounts.
Once expenses in the budget are identified and categorized, and the accounts are open, then consider income. Often a seasonal worker will have three income streams: full income, reduced income and a period of no income at all while waiting for benefits to begin. Add up all your income during these three periods then compare them with your expenses. Is there enough money to last throughout the year? If not, then go back to income and expenses and adjust them accordingly until there is.
To stay on track despite the season, move just enough cash into your cash and bill payment account. In the full income months, the ‘extra’ money will go into the cash reserve account, and in the lower period, funds will be drawn from there. Irregular expenses will be transferred to cash as they arise.
A few tips to staying on track include converting to yearly house and car insurance and allocating heat and hydro to an equal billing plan. Make your family aware of this shift so that they aren’t looking for ‘extras’ from you in the busy period but now know that you will have enough to get you through the lower paying months. Have a family meeting and ask for ideas especially from your children. See if your bank has an app that lets you and your partner monitor the accounts from anywhere at any time and adjust your spending to match your goals.
The key to managing a seasonal income is vigilance on spending year ‘round but the reward is a balanced budget where debt is being repaid and not accumulating. Managing a seasonal income does not have to be a struggle and MNP can assist you in achieving a stress-free financial life. Visit your local MNP office today for a free, no-obligation consultation.
Dian Vert is an Estate Manager serving our Hamilton and Mississauga Region. To learn more about how MNP Debt can help you, contact our local office at 905.949.4555.
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