It’s no secret that the job market is changing and many people are experiencing income volatility. In an area like Bozeman, many people in our community opt for contract or seasonal work which allows them to pursue various passions, whether it be as a park ranger in Yellowstone for the summer or ski instructor at Bridger Bowl in the winter. While this way of life may seem ideal from the onset, it becomes less than ideal when it comes time to consider health insurance, work benefits, or retirement planning.
This “seasonal” schedule of working can be even more difficult to manage when you take into consideration the rising cost of living in areas like Bozeman and Big Sky. As people continue to flee big city life and pursue the wide-open spaces that Montana has readily available, housing inventory remains low and pricing is competitive. With an unsteady paycheck, finding housing can feel nearly impossible. The type of income that can be unpredictable and rapidly changing is called volatile income.
Strategies for Managing Income Volatility
Whatever the reason may be that your income is volatile, it can be managed. Saving for a home, having money set aside savings, and living a comfortable life is all possible. It just requires more effort and discipline to ensure that your money goes as far as you need it to.
We know that managing this type of income can be overwhelming if you don’t know where to start, so here are a few tips to get you going:
Create a Budget
When you are living with income volatility, it is essential to make sure that your money is going to stretch through the periods when income is reduced. Many people shy away from living by a budget because they feel it will restrict their lifestyle, but it is often the opposite. Living by a budget allows you to plan where your money is going instead of allowing your money to control you. Creating a budget on an inconsistent income may seem impossible, but it’s not! Planning efficiently when your income is high gives you the ability to live comfortably, even during times that you may not be working regularly. Learn more about how to build a basic budget here.
Build a Savings for Gap Months
Having a budget in place will help you determine where your areas of most need are. If there are several months or time periods in the year where your income will be significantly less, you can assess your areas of need and open a savings account that will allow you to build up funds for those times. Set up an account where your savings for those gap periods are separated from your other finances. We offer several different types of accounts to meet your savings needs. Check out our savings account options here. If you have questions about which account might be best for you, our Financial Services Representatives would be happy to walk you through the different account options and help you find one that meets your needs.
Build an Emergency Savings
Your car slips on a patch of ice, and you rear end the driver in front of you. Your dog eats something he shouldn’t and needs to be rushed to the vet. You have a nasty fall while skiing and break your leg. All of these scenarios have the same thing in common: they are unplanned. An emergency is never timely, but it is even less so if you are not able to cover the expenses. Having an emergency savings separate from your gap month savings is essential. It gives you peace of mind when things go wrong. Let’s face it: at some point or another things do go wrong. Instead of pretending like they won’t and hoping for the best, having savings set aside specifically for the purpose of emergencies allows you to put the financial burden out of mind and focus on the situation at hand. If possible, it is best to have at least three to six months of your regular expenses set aside as your emergency savings. You can learn more about planning for emergency savings here.
At Bank of Bozeman, we believe living a life of financial freedom is possible, even if you have income volatility. We are dedicated to working with our clients to help them form financial solutions that work best for their stage of life. Whether you are a college student who works part time during the summer and winter breaks, a contract worker who finds that their work is either feast or famine, or a small business owner who is just getting started, we have a solution for you.
For a deeper dive into volatile income, how to manage it, and tips for success, check out this article.