It is difficult, no doubt, to manage personal finances when you have a variable income. Or, in other words, if you don’t have a steady paycheck on a timely basis.
Then things get even worse when you have racked up some big consumer debts like credit cards, personal loans, and all. What to do then! Does it mean that people, who don’t have a steady income, should not use credit cards?!
That’s why we have come up with this unique blog post for you, that will precisely help you deal with credit card debt when your income is not fixed. So, let’s carry on with the guide, and point out some very basic ideas to straighten up your credit card payments!
Take a year’s example to understand your net annual income:
This I believe you are already doing it. If not, then you better do it, before things start falling apart. You can be freelancing, have your own startup, or might be into some business. However, you should have a rough idea of what your annual income is.
Go back 2 to 3 years and see how much you earn annually. A few hundred dollar difference is not a problem, but a gap of a few thousand dollars means you need to reinvent your business strategy a bit.
You need to make sure that each year, your net income should fall within a fixed margin. The target has got to be pretty clear that by the end of each year, you are bringing in roughly the same amount of money. That’s your call, and it depends on how you will do that!
Understand the credit cards you have and the payments they require:
Credit card debts are like damsels in distress that require special attention. The more you ignore them, the more will they swell with anger, which grows red on interests!
But, your income is not stable. A big reminder for you, every time you look at the bills. Now, the best thing you can do is get an overall idea of how much percentage the credit card payments demand, of your total annual income.
If around 1/3rd of your net income, then you seriously need to regulate your spending behavior! A credit card payment that makes up more than 30% of your income is not at all a good sign. But whatever! You’ve got to deal with the situation. This brings us to our next and most vital step.
Keep aside the same percentage of money each month for credit card payments:
If your credit card debt requires 25% of your annual income, to be paid off in full within one year, then here’s what you need to do. Each month, no matter what you earn, you keep aside 25% of it, for your debt. Now, if you earn $1, then separate 25 cents for the credit cards. Sounds funny?? Well, that’s what you got to do, my friend!
It’s a lot easier if you understand this simple math:
Let, your incomes for twelve months be, X1, X2, X3, X4, X4, X5, X6, X7,……. X12!
Now, (X1+X2+X3…… +X12)= Total annual income (A).
So, if 25% of (A), is all your credit cards want, then give it to them.
That would be,
25% of (X1+X2+X3…… +X12) = 25% of (A).
And, that means,
[(25%of X1) + (25%of X2) + (25%of X3) + (25%of X4) +………+ (25%of X12)] = 25% of (A).
Thus, irrespective of your salary, per month, you deduct the same percentage for credit card payments. But the only thing you really need to take care of is that your predicted annual income, the year you are doing the calculation for, should not ditch you!
Give credit card debt consolidation a big-time thought:
Be it you have a fixed income or variable income, debt consolidation is the master plan you can always take shelter from. Highly effective when you are dealing with unsecured debts, especially credit cards.
If you think that your monthly payments are really high, and if only you could extend the course of payments, by lowering your monthly amounts, then debt consolidation is what you are really talking about.
This unique debt relief process works out best when you enroll in a debt consolidation program with a consolidation company. They will talk to your creditor and try to make some shifting and arrangement to your credit card payments, based on your affordability.
Once the deal is successful, you will just have to pay the consolidation company some minimized amount each month, which in return the company will disburse among your creditors, as per the agreement they made.
Debt consolidation will surely lower the payment burden quite significantly. So, be wise and talk to a consolidation company as fast as you can. Once the monthly payments get lowered, you won’t have much problem paying off the credit card debt on a variable income.
The final step to take always increases your income, and get a steady cash inflow:
Big investors, well-off businessmen, and good entrepreneurs all have debts around them. But, rarely you will find them so freaked out about their debts. The hidden truth is, even if they are self-employed, they still try to maintain a steady income.
On the other hand, however, if your income is season based, like woolen products or commodities and all, then try to expand your product range. Now, we can’t discuss over here how to expand your business! I believe I have done my part.
Best of luck, and do follow the tips I gave you throughout the post. If required go through this post again and again, in order to understand the simple maths, I explained.