How to Budget When You Have Seasonal Income

Rewarding careers don’t always come with a steady paycheck. For people who work in agriculture, construction, tax preparation, entertainment, landscaping or other types of freelance and seasonal businesses, income may vary wildly depending on the time of year. This uneven cash flow makes budgeting especially challenging, but it’s by no means impossible.

Here’s how to budget for long-term financial stability when your income changes with the seasons.

Determine your average monthly income

With most traditional budget plans, you start by determining your monthly income. But how can you complete this first step if your income keeps changing? The most effective strategy is to use your average monthly income. To calculate this, add up your post-tax income for the past three or more years and divide that sum by the total number of months. If economic conditions have — or are projected to — hit your industry or business hard, you may want to deduct 15% to 20% from this number to create a safety cushion.

Calculate your average monthly expenses

When work is seasonal, expenses often fluctuate, too. During busy times, you may have to spend more on gasoline, utilities, equipment maintenance and office supplies. If you spend more during your busy season, determine your average monthly costs by adding up your personal and work-related expenses for at least one year and dividing that figure by the total number of months.

Fine-tune your budget

Subtract your average monthly expenses from your average monthly income to get your baseline budget figure. If you find you’re cutting things close or dipping into the red, you’ll need to make some adjustments. Consider cutting unnecessary expenses or picking up extra income by expanding your existing business’s volume, taking temp work during slow times or offering complementary services that peak during your off-season.

Become a saver

Having a savings plan is an especially important safety net when income is irregular. When planning your budget, be sure to include a line for saving each month. It’s best if you can put away 10% or more of your income, but even small amounts deposited consistently add up significantly over time with compound interest. Aim to save at least three to six months’ worth of expenses to ensure you can live comfortably during lean times or emergencies.

Additional survival tips

To help even out cash flow and make the most of seasonal income:

Make it easier for customers to pay you quickly by improving your invoicing procedure, offering options such as PayPal or Square to accept credit card payments, or setting up direct deposits to your account with customers.
Negotiate with vendors and suppliers for discounts or extended payment terms.
Take advantage of financial and budgeting software such as QuickBooks.
Consider offering discounts and promotions during slow times to boost business.
Track your cash flow regularly and adjust your budget as necessary.
Even with your budget plan in place, keep spending to a minimum during slow seasons.
Stick to your budget during your busy season to avoid spending the cash you’ll need during the down times.

Seasonal income doesn’t have to mean financial feast or famine. With proper budgeting, you’ll be able to live well no matter what the season.

What is “House Study Bill HSB643” and why should everyone in Iowa support it? During this election year we’ve heard a lot about income tax, and paying one’s fair share. This concept is critical to the success of our state’s economy. Credit Unions pay very little tax on their income, unlike all other financial institutions which provide the same services. This Bill would require Iowa’s largest credit unions to disclose basic information about how they are using their substantial tax benefit. It will require the same disclosure of information that other “not-for-profit” entities must comply with.

The Bill would impact ten or fewer credit unions in Iowa. Those large, “complex credit unions” would then be required to disclose: total state income tax paid annually, information including executive compensation, and the basis for which they claim receiving a ‘low income’ designation.

The credit union industry does not currently report aggregate income tax paid as is required of other business industries. Moreover, while other not-for-profit entities report information such as executive compensation, only credit unions are allowed to keep this information secret from the public. Finally, the ‘low income designation’ greatly expands credit union powers (and their tax exemption) beyond their traditional charter but no one will clarify what the designation is based on.

The ten largest Iowa credit unions made in excess of $100 million in 2015, and paid a miniscule amount of income tax on those profits. Credit Unions were given non-profit status and chartered so that they could serve specific groups of people and to serve a social mission. They no longer serve only a select group of people and many now lack a specific social mission, to serve those that may not otherwise have access to financial services. Iowa taxpayers deserve to know just how much the credit unions’ tax benefit is worth and who is really benefiting from their subsidization.
The credit unions’ argument against this bill is that it “undermines Iowa credit union confidentiality laws”, however the language clearly states that the credit union regulator must use aggregate census data and not individual credit union member information. The credit unions’ real motivation in opposing this bill is they don’t want the Legislature, their members, or Iowa taxpayers to know anything about how they are using this very substantial tax benefit. All Iowans pay more when some don’t pay their fair share.

Please support HSB 643 and help shed some light on this issue for all Iowa taxpayers. I urge you to contact your State Representative, and ask for their support of HSB 643. Contacting your legislator is quick and easy, just click here – curt.hanson@legis.iowa.gov or dave.heaton@legis.iowa.gov
To search for other state elected officials, click here – https://www.legis.iowa.gov/legislators/find?address=&city=Fairfield