Letters: How can I budget when I'm self-employed?

A U.S. Postal Service letter carrier prepares to place letters in a mailbox.

We're still fresh off of our love hangover from Valentine's Day here at Money this week, so we've invited a couple of personal finance experts to answer your questions about money and relationships. Bob and Kristy Walker have been married for 22 years and for the last four of them, they've written the blog "Frugal Fun and Financial Fitness."

Nina from Bolton, Mass., has a question about keeping a budget. She works part-time as an accountant while her husband is self-employed. She says some months are good while others aren't. She wonders how to better manage that fluctuating income.

Bob has experience being a self-employed contractor.

"I made more money in one month than ever before and then some months were really lean. A couple of things that we did. First is that we wrote down where we spent every penny. That really showed us little leaks that we could stop and not change our lifestyle dramatically, but make changes," says Bob.

By logging where they spent money, Bob and Kristy found that they spent $600 a month eating out. By cooking a few more meals at home, the Walkers were able to set up a college savings account for their kids.

"This might be a family exercise as far as what do you as a family really value. Get the kids involved, teach them a little bit about money management. The goal for you guys is to really set up a big emergency fund where you can smooth out those months and then ease the envelope system," says Bob.

Bob also has a novel way to avoid racking up additional credit card charges.

"With credit cards, they're really tempting to use. It's hard to really cut up credit cards, but what you can do is put your credit cards in a little plastic bowl, fill that bowl full of water and stick it in your freezer so you're literally putting your credit cards on ice."

"Since your income is so variable, stop using those credit cards if at all possible and for every month, making a payment to one of the credit cards, focus on getting that balance to zero as well as paying into your savings account at the same time. Eventually, that's what you're going to be tapping instead of turning to those credit cards," adds Kristy.

For more advice on how to make ends meet when an unexpected tax bill comes your way, and how to build an emergency fund even with unsteady employment, click play on the audio player above.

About the author

In more than 20 years in public radio, Barbara Bogaev has served as the longtime guest host of NPR’s flagship program Fresh Air with Terry Gross, as well as host of APM’s news and culture magazine, Weekend America and the weekly national documentary series, Soundprint.

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