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While working in your pajamas, setting your own hours and doing the digital nomad thing are largely touted perks of freelancing, a major pain point is dealing with variable income. When your income fluctuates from month to month, it can be challenging simply to create a budget and have just enough money to squeeze by. But what about going beyond daily expenses and growing your money?

For small business owners who deal with seasonal fluctuations and freelancers who deal with “feast or famine,” having money to invest can be a tall order. But it’s not impossible. With a bit of know-how and financial savvy, you may very well be able to pull it off.

Here are a few pointers on how you can go about investing with a variable income.

Save Based on Percentages

If your income fluctuates wildly, save based on percentage, suggests Kristin Wong, freelance writer, journalist and author of Get Money: Live the Life You Want, Not Just the Life You Can Afford.

That means after you pay yourself a salary to cover your basic expenses – and save a portion for estimated quarterly taxes – make it a rule to set aside a percentage of every deposit that goes into your account.

If you’re feeling a bit overwhelmed, start small: 5% or 10% would be a great start. And there are apps that can help you do this automatically. For instance, Qapital has a “Freelancer’s Rule,” and it will automatically save a percentage of any deposit that goes into your bank account. If you’re a Chime Bank member, with automatic savings, you’ll save 10% of every paycheck via direct deposit. You can then use whatever amount you saved toward investing.

Separate Your Business and Personal Accounts

It’s important to separate your business and personal accounts for several reasons. It gives you more legitimacy as a solopreneur, and it helps you keep track of tax deductions. But once you’ve calculated your monthly income, set up an automatic transfer from your business account to your personal checking account every month, suggests Wong. “It’s like getting a paycheck from an employer, but you’re the employer,” says Wong.

Then, on those months that you’re paid more than your baseline, this “leftover” amount will automatically be saved in your business account. This works if your income doesn’t fluctuate too much, points out Wong. After you pay yourself a salary for that month and budget expenses accordingly, the “excess” amount in the business account automatically becomes savings.

“It just sits there, and since it’s not in my personal checking account, it doesn’t really feel like ‘my’ money, anyway,” says Wong. “Once I’ve accumulated enough in that business account, I transfer it to my retirement account or another true savings account.”

Map Out Projected Income for a Year

Without a plan, you won’t be able to set money aside for investing. And oftentimes self-employed folks live month to month because it feels “unpredictable.” But if you’ve been freelancing for a while, you will notice seasons of income, points out Pamela Capalad, a certified financial planner and founder of Brunch & Budget. Being aware of when those are will give you an idea of how to plan for the low- and high-income months.

To start, map out your projected income for the year. Then do a 12-month cash flow to see what your actual peaks and valleys are for your income. In turn, you’ll be able to adjust how much you save each month accordingly.

Invest Through a Health Savings Account

A health savings account (HSA) is available for those who have a high-deductible health plan that they purchased either on their own or through their employer. Typically it’s used to pay for out-of-pocket medical expenses. With an HSA, you can turn a downside of having to pay for your own health care into a win. First, HSAs offer triple-tax advantages: Your contributions are both pretax and tax-deductible, your earnings grow tax-free and your withdrawals for qualified medical expenses are also tax-free.

And with an HSA, you have the option of not spending the funds in your account toward out-of-pocket medical expenses. Instead, you can invest them in a bunch of different securities, such as mutual funds, stocks and bonds. So treat an HSA like a vehicle to save for retirement.

When I had a high-deductible health plan, I auto-saved the same amount each week until I maxed out on my contributions. An added bonus: Because you’ll be saving on taxes, you can put the amount you saved toward investment. (Note: In 2018, the annual contribution limit for HSAs is $3,450 for individuals and $6,900 for families.)

Open a Savings Account That Pays Interest

With the average savings account yielding a 0.06% annual percentage rate (APR), you won’t be making much in the way of interest. But consider putting your savings in a separate savings account at a financial institution that actually pays interest, suggests Eric J. Nisall, creator of Bookkeeping For Bloggers. “First, it will help to not have the savings commingled with the living fund,” says Nisall. “If you have trouble saving, the least you can do is make sure that the money you do save is working for you. Even if it’s only earning 1.5%, that’s still better than having it sit in an account that doesn’t pay anything.”

Invest Quarterly or Yearly

The beauty of being self-employed is that you actually have quite a few retirement plan options. There are solo 401(k)s, SEP IRAs, and, of course, good old Roth and traditional IRAs. Sure, we’re taught to sock away a percentage of each paycheck toward retirement. But if your income fluctuates wildly, what about depositing money into your retirement account every few months or even once a year? “Instead of contributing to a retirement account every month, do it once a year,” says Capalad. “That way you know exactly how much you can afford to contribute.”

After I pay myself a monthly salary, I personally set aside a percentage of what’s “leftover.” Then every few months or so, I’ll check to see how much I have. If it’s more than a set amount, I’ll transfer it over to my SEP IRA account. 

While it certainly takes more work and planning than if you had a regular 9-to-5 job, investing when your income is variable is doable. By coming up with a tactical game plan and sticking to it, your retirement savings will grow and start working for you.

How do you save for retirement with a variable income? Share your tips in the comments below!

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