Simple Tips for Living on a Fluctuating Income

When wellness pros want to take home more money while freeing up time, we start the conversation about incorporation. When it comes to incorporating your practice, there’s one basic question we ask – “what percentage of your income do you spend?” More times than not, we’re greeted with the answer, “Just about everything I make!”

More than 50% of wellness pros spend almost every dollar they earn.

Looking at this response now, I'm shocked. But re-wind to years ago and I too was on Team "Spend It While You’ve Got It". I had never learned to budget or save for the long term. I simply made do with what I had at the time. I didn’t realize how this lack of financial security was affecting my feelings of general security until Mr. HBA entered my world.

Since then I’ve become a total budgeting boss! I’ve taken the same financial journey as many of you, so I understand how difficult it can be to figure out where to begin when it comes to budgeting, especially when we depend on an income that fluctuates (sometimes intensely) month-to-month. Here are some tips to help you get started:

1. Calculate your baseline

Track your spending for 1-3 months to determine the bare minimum amount you need to cover your expenses (personal + biz). If you're a budgeting newbie, I'd recommend starting the old fashioned way with paper and pen, that way you can clearly see exactly what you're spending. This figure helps you set the expectation of how much you’ll need at a minimum moving forward. 

2. Set hard budgeting rules for yourself and follow them

Once you’ve got your baseline down, it’s time to take a critical look at everything you spend money on that isn’t a necessity and pare it down. You don’t have to go totally frugal! Determine what “wants” are important to you and find a way to make trade offs on other expenses in order to fund these. 

3. Restructure your biz

For most practitioners, incorporating their biz makes sense once they’re making about $40k annually, and spending at least a few thousand less than they earn. Through this new biz structure you’ll pay much less in taxes, leaving you more disposable income at the end of the year than if you continued to practise as a sole proprietor. Same gross earnings, same number of patient visits, same price per visit charged; but you take home more. 

4. Pay yourself on a regular basis to cover your expenses

With a fluctuating income you’ll have months where you do better (ex. December when benefits are about to run out) and months that are slower (ex. Summertime when everyone is on vacation). Pay yourself regularly based on your previously calculated baseline. This way, whether it’s a great month or an average month, you’ve got the money you need and you’ll save the extra. 

5. Take advantage of your corporate bank account 

Once incorporated, any funds left in the corporation will benefit from a much lower tax rate. For self employed babes like us, it’s best to keep money in here until we need it. Use this account as your emergency fund, vacation fund, and savings account rolled into one. Withdraw extra money (above you’re baseline) only when you need something or want to make a big ticket purchase.

Now get out there and start thriving on your fluctuating income!