You don’t need a stable source of income to keep your personal finances in order, says Elizabeth Sánchez, Costa Rican financial advisor. In addition to a good organization, the following is recommended:
• Understand what are the sources of income that are available and not think in amounts but in the actions that have to occur to obtain them. Having these clear numbers ensures the minimum income to cover the required cats.
• Start from a budget that is attached to reality. The easiest way to do this is to take the average of your income from the last six months as a parameter to have a good starting point.
• Once the average income has been defined, a budget can be formed and from there, put expenses, savings and debt payments, until each penny has a purpose. This will allow you to understand how the money is going to be used.
• Prioritize. There is the possibility that there will be months where income will be higher and others lower, so it is important to know what to do in each of these cases.
Dividing the income
For the last recommendation, Sánchez advises dividing expenses and savings into three main groups: VIPs that are the most important, those in the middle that are important but not vital, and fillers that are small luxuries. To avoid spending more than what you have, once the VIPs have been covered, you can continue with the middle ones until the income runs out.
When income is above average, it is important to decide at that moment what to do with that money; Saving a part for the months of less liquidity, taking advantage to complete the emergency savings or investing it in a business are some options.
