August 26, 2025 • 21 mins
Plenty of us have inconsistent incomes - freelancers, casual employees, commission-based workers and more. So how then do you save money (for holidays, for investing, for emergencies)? Join Canna Campbell - a financial planner for 20 years - and Fear & Greed's Michael Thompson as they look at how to save on an inconsistent income, and a budgeting method that can change everything.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to How Do They Afford That, The podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed Business news. As always, I'm with Canna Campbell,
financial planner and founder of Sugar Mummer TV, the financial
literacy platform covering YouTube, podcast books, Instagram, threads, TikTok and more. Hello, Canna,
Good morning Cana. A lot of people don't work in stable,
(00:27):
consistent jobs, right, and I think the rise of the
gig economy. I mean, the gig economy has always been there,
but the rise and the the prevalence of platforms like
kind of Uber and air Tasker and things like that,
right have just made it so much easier for people
to build an income or multiple streams of income out
(00:52):
of the gig economy. It's great, but it can be
a little bit unpredictable. So my question for you today
is how do you save when your income is a
regular Because saving money matters. We know that you've got
to build up your emergency fund, you've got to keep
your budget kind of in the black, but also if
(01:13):
you want to get ahead through investing and stuff. You
need to be able to put money into that, right,
So how do you do it? Okay, do you want
me to narrow it down slightly?
Speaker 2 (01:24):
We should also point out you don't have to be
necessarily as part of the gig economy to have this
inconsistent income. You know, for example, people who are commission based,
you know, they were going to sales job. You know,
their income fluctuates, you know, real estate agents. You know,
it's might be a quite a month or two and
then they might be flush with cash.
Speaker 1 (01:42):
Yep. Casual workers in a whole range of different jobs.
Speaker 2 (01:45):
Yeah, even people working remotely, you know, seasonal work, you know,
working in Santa Ski field, or people who work for say,
cruise ships when they're on board, they're working, but when
they're not.
Speaker 1 (01:56):
Yeah, any kind of freelance work, all that kind of thing.
Speaker 2 (01:58):
Okay, So not just excluding people here, not just gig economy.
Speaker 1 (02:03):
No, it is much much much bigger than that, wider
than that. Yeah, Okay, in that case, since we are
now talking big picture, right, let's start with the bigger picture.
Is saving even more important when your income is unpredictable
to give yourself that buffer?
Speaker 2 (02:20):
Absolutely, it is a non negotiable. It is an essential.
It is that savings that you have set aside, well
away from your everyday spending account, is that's going to
help smooth out the highs and lows and will help
you stay sane and safe during periods of time, maybe
a couple of weeks, or maybe even a couple of
months or even a year where that you have those
(02:41):
really tight lean months.
Speaker 3 (02:43):
It is your lifeline.
Speaker 1 (02:45):
What, then, I suppose, is the biggest mistake that you
see people making if they've gotten a regular income when
it comes to saving. Is it not appreciating the importance
of doing it when they've got a good week or
a good month.
Speaker 2 (02:58):
Yes, so I see two of the most sort of
common mistakes. Is number one is actually holding out thinking,
you know what, we've had a really good month, or
I've had a really good month this month, I'm just
gonna spend a bit here and I'll save next month's
you know, paypacket, And then you say the same thing
the following month, and it never actually eventuates. You never
actually start building up that safety money of that bar
(03:20):
for a or that emergency fund. The other mistake I
see is people assuming I guess it'd be like counting
their chickens before their hatch. Is that the good times
will just keep rolling and you know, their lifestyle just
continues on and the lifestyle creep then kicks in and
they don't actually realize their abnormal months or their abnormal
(03:41):
successful periods of time that's not the norm. So they're
the biggest mistakes I see, and they come with massive regret.
Speaker 1 (03:48):
Okay, how do you do it? Then? Is it a
case of setting? And I want to talk to about
budgeting as well. I will do that a little bit
later on. But in terms of just saving, do you
try to set a a specific dollar amount that you're
going to save each month or does that not work
when your income is variable?
Speaker 2 (04:05):
Look effects fixed amount is better than nothing at all,
But I much prefer a flexible sort of dollar amount
where you have sort of targets and any amount over
this amount you normally own goes into this account. I
have a big issue with these percentage systems. You know,
the buckets, okay, like you know, spend fifty percent, save
(04:29):
twenty percent, invest thirty percent. Like the hard and fast
rules I find very limiting and leave people feeling like
they've failed, and then they.
Speaker 3 (04:39):
Don't bother trying at all.
Speaker 2 (04:41):
You need, you know, if your income is fluid in
that it is volatile. One month it's okay, next month
it's averaged. In the following month it's miserable. But then
you've got a great big paypack or a big check
coming in. You've got to be keep your cash flow
management fluid. It's why I like to talk about Yeah,
and it's a really long analogy but which I won't
(05:03):
go into in detail. But previously in other episodes I've
spoken about being like a traffic control director with.
Speaker 3 (05:07):
Your cash foe.
Speaker 2 (05:09):
You've got to, you know, look at what the traffic
is banking up. You've got to move traffic along. You've
also got to work out whose turn is it to
like sit and wait for a bit and let other
people go past. You've kind of got to do that
even more so, and that's one of the pressures that
come with having a regular income and managing all of
the expenses, because whilst your income fluctuates, our living expenses
(05:29):
also fluctuate. We have expensive months, we have frugal months,
we have low key months. We have unexpected expenses during months,
So you know, you're juggling a lot, you've got to
really stay.
Speaker 3 (05:40):
On top of it.
Speaker 1 (05:41):
Okay, Just to kind of paint a picture of how
that that might work, let's do a little example an exercise,
shall we. So to keep it really simple, let's say
one week you earn a thousand dollars, yes, all right,
and then the next week you earn ten thousand dollars.
It's an absolute per week. That one me too. I
like that second week. But this is the risk I
(06:04):
suppose of the percentage system. It's in that one thousand
dollars week, so you have fifty percent of it going
to your mortgage or rent. So there's five hundred dollars gone,
and then you say that, okay, my next thirty percent
is going to groceries, and then the next ten percent
is going towards other bills, and then the final ten
percent is my savings. All right. So that's one hundred
(06:25):
dollars going into your savings, one hundred dollars into your
other bills, three hundred dollars going into your groceries, all right, Okay,
So that means that then you are putting aside hundred
dollars one hundred dollars. That means then that the following week,
when you make ten thousand, that means that you are
only then putting one thousand dollars into savings, and all
(06:47):
the other ones are just completely blown out of all proportion.
Whereas you would be better to say, you've got your
five hundred dollars for your for your mortgage or your rent,
your three hundred dollars that you still need for your
for your gross, you hundred dollars for your other bills,
and then everything north of that, yes, suddenly means that
you are putting aside nine thousand, one hundred dollars into
(07:11):
your savings exactly.
Speaker 2 (07:12):
And this is why I don't like these hard and
fast percentage systems. I think they are Look most people
I can't even fit into these percentage systems a financial planner.
But when you look at a dollar amount and you say, okay,
well we need this much to pay for the rent,
this much for groceries, this much for utilities and transport,
(07:33):
and then we can sect like, look at what's left
over and then divvy it up as a dollar amount,
that's great. And then if you have another bumper of
a month, you can keep adjusting it and have sort
of goals that you work around it. So it is
really important that you create something that is a boundary
that is right for you and what you need, and
can actually work with you to build that consistency and
(07:56):
smooth out your cash flow.
Speaker 1 (07:58):
That doing that little exercise, I think probably illustrated it
for me more than anything else that I've heard, because
all of a sudden, you have built yourself up a
very very nice buffer rather than just spending it because
you think you can, because you're doing it on a
percentage basis.
Speaker 2 (08:15):
And it feels really nice having emergency money. It is
a great night sleep knowing I've got fifty thousand dollars
in a separate savings account in case I have a
few bad months, or if I lose my job or
you know something, you know, my work drives up.
Speaker 1 (08:30):
Yeah, is the key to this discipline, because otherwise how
do you kind of stop yourself from going into panic
mode I suppose in lean months and then over spending
in the good months. Is it just about being really
really strict with yourself.
Speaker 2 (08:44):
Yes, self control, But also it's about having a good memory,
not necessarily a good memory of bad things that happened
to you, but witnessing other people. So remembering God, I remember,
you know, my best friend went through a really hard time,
and you know, he or she didn't have an emergency
money and they had to move back home or they
had to sell their house. You know, those sorts of
(09:05):
things like capitalizing on someone else's lesson can be really
powerful and helping you stay focused and motivated and having
that sense of discipline because you build a sense of
respect just to what that buffer account or that emergency money,
whatever you want to call it, provides you, and it
will help you take away that temptation where you go
(09:27):
to spend it because you're like, no, I don't want
to end up like that personal I remember this happened
to me a few years ago, and I was so stressed.
Speaker 3 (09:33):
I was so anxious. I'm never going to let that
happen again.
Speaker 2 (09:36):
I'm learning, I'm growing, I'm leaving that behind in my past.
So it really is about focusing on the benefit of
that money so that it's not even a temptation.
Speaker 3 (09:45):
It's no negotiable.
Speaker 1 (09:46):
As I said, Okay, we're going to take a quick break.
When we come back, I want to talk to you
about budgeting methods. I want to talk about the idea
of setting yourself a pretend salary.
Speaker 2 (09:56):
Well, you're talking about my drip feed technique, so that
you get ready for that helpful.
Speaker 1 (10:02):
Drip feed, and then also this idea of automatic savings
transfers and whether you can kind of automate the process
so that you don't have to think about it and
don't stress too much. There's actually a lot to get through,
isn't there. We'll take a quick break and come back
in a moment and do that. Can We're talking about
(10:24):
how to save when your income is unpredictable, And as
you said, this is bigger than the gig economy. This
is any kind of freelancers or anyone on commission based work,
or anyone in casual work or anything where your shifts
might vary and your income might vary. So this is
actually a lot of people budgeting methods. Okay, is there
anything that works better for say, for gig workers, freelancers,
(10:49):
et cetera.
Speaker 2 (10:49):
So welcome to my lesson on my drip feed technique.
So what you do is you put all of your
income into the one account, and you know it doesn't
matter where it's come from, you know who from how
much it all goes into the one account. You would
then pay yourself initially a small set salary per week,
(11:13):
per fortnite, per month, whatever you would prefer to help
you manage your cash flow, and that obviously accounts also
for tax as well if you are self employed. But
it basically it takes it creates almost like a fake
salary for yourself, but it creates consistency in your income,
which for a lot of people will make it a
(11:33):
lot more a lot easier to actually manage the cash flow,
which is one of the key foundations of actually financial
good financial management.
Speaker 1 (11:41):
And so you're pretending then that this set salary is
what then goes on to pay for all of your
other bills.
Speaker 2 (11:48):
Ess all the normal all your normal living expenses and bills.
And I recommend people started off as low as they
can to help build up that account because it may
take a couple of months to actually build up a
decent balance, but you and then you can review it,
so you might go, okay, well, I'm going to take
five thousand dollars per month as a net salary and
obviously accounting for a pay as you go tax depending
(12:09):
on your if you're self employed or not. So then
you would sit with that for a couple of months
learning how to live off with that as a set salary.
Then say in a month or two time or next quarter,
you look at that and go, can I give myself
a pay rise? Perhaps I can afford to actually give
myself now six thousand dollars per month. Again, you've got
to account for the increase in tax that you can
prepay to the ATO if you want, or put into
(12:31):
a separate savings account, so that you are allowing giving
that account the time to actually build up, so that
you have a decent amount set aside, and that money
keeps on flowing. And again you can review it. You
might need to slightly tweak it and change it as
your situation changes, your needs change. But it is a
great way of taking away that sense of instability that
(12:55):
comes from an irregular, volatile income stream.
Speaker 1 (12:59):
A cash flow, all right, And at the same time,
this float essentially would be expanding.
Speaker 2 (13:06):
Yes, yes, And that's when if you see, for example,
I might do this for a couple of months and
I think, I see, okay, well I've actually now I've
got instead of having say fifty thousand dollars in savings
for my drip feed technique, I don't need as much
as that I might reduce it accordingly, or am I going?
You know what? I know that there's some really tight
months coming up, and I could be without a job
for a lot longer than I initially thought. I actually
(13:26):
need that base amount to be a lot higher, around
say seventy thousand. But the point is you're regularly engaging
with it, but you're creating almost like a pretend salary
for yourself.
Speaker 1 (13:39):
I really like that. The problem that I see with
it is the potential to dip into that float when, if,
and when you need it. And I suppose this probably
comes back to a discipline thing.
Speaker 2 (13:56):
Well, that's about to say like it is a big
responsibility to manage your cash flow. It is not something
to be disregarded. You do need to track and regularly
check your cash flow, and you really need to connect
with your why, which is why I refer to learning
from previous mistakes, or learning from other people's previous mistakes,
(14:17):
so that you can take on some wisdom here. And
you know, a great way to stay motivated is to
look at.
Speaker 3 (14:25):
Making it as visual as possible.
Speaker 2 (14:27):
And I see this a lot in the debt free community,
where people have created like charts and graphs and envelopes
and stickers and you know, really made it incredibly visual
and colorful.
Speaker 1 (14:38):
You know.
Speaker 2 (14:38):
And they've done it in a digital way through canber
or they've got stuff on the fridge to help them
see their progress. And I always say, like progress fuel success.
When you can see, okay, we're building up that buffer amount,
or you know, we're ready to take a bit of
a salary increase from our drip feed technique, you can
actually see that it's working. The debts are coming down,
you're actually engaging with your finances. You're a lot more
(14:59):
You've got a lot more skin in the game, You're
a lot more emotionally engaged, committed connected. You can see
it's working. The hard work's paying off. That's only going
to fuel that determination and commitment to keep it going
and make sure this continues on working for you.
Speaker 1 (15:13):
Okay, And does that big float from which you pay
that that drip feed kind of salary, does that replace
the emergency fund or are you separately feeding into an
emergency fund.
Speaker 2 (15:27):
Look, it really depends on your situation and what your
financial responsibilities are. Ideally, in a perfect world, you have
emergency money separate as well as your drip feed float
system happening as well. So yes, they are different, and
I probably confuse the listeners and yourself Michael by Court
referring it maybe as an emergency money. Technically they are separate.
(15:51):
This is to help manage your the inconsistency of your income,
and I rarely see it well. To be honest, I
have never seen anyone be able to manage irregular income
successfully without this technique.
Speaker 1 (16:06):
Okay, so that's how important.
Speaker 3 (16:08):
So I smoke up my own ass. But yes, that's
quite the image, isn't that?
Speaker 2 (16:12):
But because I know it works, and I know with myself,
especially when I started my own business years ago, like
I was, I was twenty six, twenty seven, and I
had a mortgage. I had a lot of risk on
my shoulders and I was paid quarterly. Wow yeah, and
it took three months before I got my first paycheck.
So this is what I did, and it worked, and
(16:34):
I still swear by it today.
Speaker 1 (16:36):
I have experienced this as well in book publishing. Yes,
when I published my first novel in twenty twenty three,
and it is essentially payments related to that, I staggered
almost over not two and a half years, which means
(16:56):
that you have to budget and manage that cash, which
is just such a challenging thing to.
Speaker 2 (17:02):
Do, and it's also time consuming as well. That's why
I like the system is because all the money goes
into the one bucket.
Speaker 3 (17:07):
There's none of this.
Speaker 2 (17:07):
Okay, when I get this check from here, I'll put
it to that, When I get this deposit here, when
that money comes in on when that gets paid, I'll
put it here and there.
Speaker 3 (17:15):
It just put it simplifies it.
Speaker 2 (17:17):
And you know, if you are juggling multiple jobs like
it's the gig economy, or you're juggling lots of things
in life, as we all are, this just makes it
really clean and really simple. And I think that's what
we over complicate things by having multiple accounts. I'm looking
at you, Michael, and you know we don't need to
just keep it simple so that you were engaged with it,
(17:38):
and you don't because it's easy to understand. You don't
put it off either.
Speaker 1 (17:42):
You are going to be so proud of me. I
have not told you this recently, please the under seventeen
because in the past we've talked about the fact that
I had twenty six bank accounts, right and then you
got that. You put me on a bank account diet
and told me I wasn't allowed to open any more,
and I got it down to what I thought was nineteen,
(18:02):
and then it went back up to twenty two because
I found some more. The other day, I consolidated a
whole bunch of bank accounts and I am now down
to let me it is fifteen.
Speaker 3 (18:23):
I am really proud of you right now.
Speaker 1 (18:25):
It is. In fact, it could actually be better than
that because.
Speaker 3 (18:28):
I see progress, feel success. So you are evidence.
Speaker 1 (18:32):
Yeah, it is, and it is all about just trying
to improve that cash flow, the visibility over cash flow.
And so this has been a really interesting process talking
through the drip feed system. I mentioned automatic savings transfers.
Really you can part of this is automated, then, isn't it.
If you are doing this drip feed system, then you
are paying yourself that same salary every single week, which
(18:56):
is an automated thing you.
Speaker 2 (18:57):
Can set up automated. But this is the thing, and
you did ask me this question which we haven't touched on,
but the automation. Automation is great because it obviously takes
it's one less thing for you to have to do,
but it also can make us maybe a little bit lazy, okay,
and hold us back from actually achieving our true potential. So,
(19:17):
for example, say I have you know, two hundred dollars
per month regular savings plan to build up you know,
my my emergency money. For example, if I have an
irregular income stream, I could potentially save more so and
which means I could build up my emergency money number
(19:39):
a lot faster. So by having that money staying in
my account, I could be actually transferring three hundred dollars
per month or four hundred dolls per month. But I
don't I to stick to this automated system of two
hundred dolls per month. I'm probably gonna go and spend
that one hundred two hundred dollars a month that I
actually could afford to put aside. And that's where I
think the danger lies because.
Speaker 1 (19:58):
To get into that that the challenges with the percentage
system that we talked in the first part.
Speaker 2 (20:02):
It but also we don't actually look at our numbers,
and that's what we need to be doing. We need
to be checking our accounts, we need to be checking
our transactions, and we need to be making sure that
we're doing the best we can obviously, but whilst enjoying
a healthy balance in life.
Speaker 1 (20:15):
Okay, Look, the drip feed system is just such an
interesting way of operating.
Speaker 2 (20:21):
I explain it actually in so much more detail in
my book Mindful Money.
Speaker 3 (20:26):
I even have like charts and graphs.
Speaker 1 (20:27):
Okay, it's very helpful. And I think we talk then
about that that is not just helping you save, that
is helping budget at the same time, and in doing
so you may well be able to allocate money not
just to your emergency fund, but also to investing exactly
and help get you ahead. Okay, comprehensive. And I like
(20:50):
the fact that you pointed out this is bigger than
just the gig economy. This is so many people who
I mean, it almost feels like people with a fixed,
stable income are in the minority these days.
Speaker 3 (21:02):
Yeah, I agree.
Speaker 1 (21:03):
Yeah, very useful. Okay, where do we find you if
we need more information?
Speaker 2 (21:06):
Well, if you have any questions about my drip feed technique,
just send me a damn on Instagram at sugar mom
My TV and I'll come back to you as soon as.
Speaker 1 (21:12):
I can and you can hear me every day with
Sean Aylmer on Fear and Greed Business news you can use.
Thank you very much for listening to how Do They
Afford That? Remember to follow on the podcast, and the
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us again next week.
Welcome to How Do They Afford That, The podcast that
peaks into the financial lives of everyday Australians. I'm Michael Thompson.
I'm an author and the co host of the podcast
Fear and Greed Business news. As always, I'm with Canna Campbell,
financial planner and founder of Sugar Mummer TV, the financial
literacy platform covering YouTube, podcast books, Instagram, threads, TikTok and more. Hello, Canna,
Good morning Cana. A lot of people don't work in stable,
(00:27):
consistent jobs, right, and I think the rise of the
gig economy. I mean, the gig economy has always been there,
but the rise and the the prevalence of platforms like
kind of Uber and air Tasker and things like that,
right have just made it so much easier for people
to build an income or multiple streams of income out
(00:52):
of the gig economy. It's great, but it can be
a little bit unpredictable. So my question for you today
is how do you save when your income is a
regular Because saving money matters. We know that you've got
to build up your emergency fund, you've got to keep
your budget kind of in the black, but also if
(01:13):
you want to get ahead through investing and stuff. You
need to be able to put money into that, right,
So how do you do it? Okay, do you want
me to narrow it down slightly?
Speaker 2 (01:24):
We should also point out you don't have to be
necessarily as part of the gig economy to have this
inconsistent income. You know, for example, people who are commission based,
you know, they were going to sales job. You know,
their income fluctuates, you know, real estate agents. You know,
it's might be a quite a month or two and
then they might be flush with cash.
Speaker 1 (01:42):
Yep. Casual workers in a whole range of different jobs.
Speaker 2 (01:45):
Yeah, even people working remotely, you know, seasonal work, you know,
working in Santa Ski field, or people who work for say,
cruise ships when they're on board, they're working, but when
they're not.
Speaker 1 (01:56):
Yeah, any kind of freelance work, all that kind of thing.
Speaker 2 (01:58):
Okay, So not just excluding people here, not just gig economy.
Speaker 1 (02:03):
No, it is much much much bigger than that, wider
than that. Yeah, Okay, in that case, since we are
now talking big picture, right, let's start with the bigger picture.
Is saving even more important when your income is unpredictable
to give yourself that buffer?
Speaker 2 (02:20):
Absolutely, it is a non negotiable. It is an essential.
It is that savings that you have set aside, well
away from your everyday spending account, is that's going to
help smooth out the highs and lows and will help
you stay sane and safe during periods of time, maybe
a couple of weeks, or maybe even a couple of
months or even a year where that you have those
(02:41):
really tight lean months.
Speaker 3 (02:43):
It is your lifeline.
Speaker 1 (02:45):
What, then, I suppose, is the biggest mistake that you
see people making if they've gotten a regular income when
it comes to saving. Is it not appreciating the importance
of doing it when they've got a good week or
a good month.
Speaker 2 (02:58):
Yes, so I see two of the most sort of
common mistakes. Is number one is actually holding out thinking,
you know what, we've had a really good month, or
I've had a really good month this month, I'm just
gonna spend a bit here and I'll save next month's
you know, paypacket, And then you say the same thing
the following month, and it never actually eventuates. You never
actually start building up that safety money of that bar
(03:20):
for a or that emergency fund. The other mistake I
see is people assuming I guess it'd be like counting
their chickens before their hatch. Is that the good times
will just keep rolling and you know, their lifestyle just
continues on and the lifestyle creep then kicks in and
they don't actually realize their abnormal months or their abnormal
(03:41):
successful periods of time that's not the norm. So they're
the biggest mistakes I see, and they come with massive regret.
Speaker 1 (03:48):
Okay, how do you do it? Then? Is it a
case of setting? And I want to talk to about
budgeting as well. I will do that a little bit
later on. But in terms of just saving, do you
try to set a a specific dollar amount that you're
going to save each month or does that not work
when your income is variable?
Speaker 2 (04:05):
Look effects fixed amount is better than nothing at all,
But I much prefer a flexible sort of dollar amount
where you have sort of targets and any amount over
this amount you normally own goes into this account. I
have a big issue with these percentage systems. You know,
the buckets, okay, like you know, spend fifty percent, save
(04:29):
twenty percent, invest thirty percent. Like the hard and fast
rules I find very limiting and leave people feeling like
they've failed, and then they.
Speaker 3 (04:39):
Don't bother trying at all.
Speaker 2 (04:41):
You need, you know, if your income is fluid in
that it is volatile. One month it's okay, next month
it's averaged. In the following month it's miserable. But then
you've got a great big paypack or a big check
coming in. You've got to be keep your cash flow
management fluid. It's why I like to talk about Yeah,
and it's a really long analogy but which I won't
(05:03):
go into in detail. But previously in other episodes I've
spoken about being like a traffic control director with.
Speaker 3 (05:07):
Your cash foe.
Speaker 2 (05:09):
You've got to, you know, look at what the traffic
is banking up. You've got to move traffic along. You've
also got to work out whose turn is it to
like sit and wait for a bit and let other
people go past. You've kind of got to do that
even more so, and that's one of the pressures that
come with having a regular income and managing all of
the expenses, because whilst your income fluctuates, our living expenses
(05:29):
also fluctuate. We have expensive months, we have frugal months,
we have low key months. We have unexpected expenses during months,
So you know, you're juggling a lot, you've got to
really stay.
Speaker 3 (05:40):
On top of it.
Speaker 1 (05:41):
Okay, Just to kind of paint a picture of how
that that might work, let's do a little example an exercise,
shall we. So to keep it really simple, let's say
one week you earn a thousand dollars, yes, all right,
and then the next week you earn ten thousand dollars.
It's an absolute per week. That one me too. I
like that second week. But this is the risk I
(06:04):
suppose of the percentage system. It's in that one thousand
dollars week, so you have fifty percent of it going
to your mortgage or rent. So there's five hundred dollars gone,
and then you say that, okay, my next thirty percent
is going to groceries, and then the next ten percent
is going towards other bills, and then the final ten
percent is my savings. All right. So that's one hundred
(06:25):
dollars going into your savings, one hundred dollars into your
other bills, three hundred dollars going into your groceries, all right, Okay,
So that means that then you are putting aside hundred
dollars one hundred dollars. That means then that the following week,
when you make ten thousand, that means that you are
only then putting one thousand dollars into savings, and all
(06:47):
the other ones are just completely blown out of all proportion.
Whereas you would be better to say, you've got your
five hundred dollars for your for your mortgage or your rent,
your three hundred dollars that you still need for your
for your gross, you hundred dollars for your other bills,
and then everything north of that, yes, suddenly means that
you are putting aside nine thousand, one hundred dollars into
(07:11):
your savings exactly.
Speaker 2 (07:12):
And this is why I don't like these hard and
fast percentage systems. I think they are Look most people
I can't even fit into these percentage systems a financial planner.
But when you look at a dollar amount and you say, okay,
well we need this much to pay for the rent,
this much for groceries, this much for utilities and transport,
(07:33):
and then we can sect like, look at what's left
over and then divvy it up as a dollar amount,
that's great. And then if you have another bumper of
a month, you can keep adjusting it and have sort
of goals that you work around it. So it is
really important that you create something that is a boundary
that is right for you and what you need, and
can actually work with you to build that consistency and
(07:56):
smooth out your cash flow.
Speaker 1 (07:58):
That doing that little exercise, I think probably illustrated it
for me more than anything else that I've heard, because
all of a sudden, you have built yourself up a
very very nice buffer rather than just spending it because
you think you can, because you're doing it on a
percentage basis.
Speaker 2 (08:15):
And it feels really nice having emergency money. It is
a great night sleep knowing I've got fifty thousand dollars
in a separate savings account in case I have a
few bad months, or if I lose my job or
you know something, you know, my work drives up.
Speaker 1 (08:30):
Yeah, is the key to this discipline, because otherwise how
do you kind of stop yourself from going into panic
mode I suppose in lean months and then over spending
in the good months. Is it just about being really
really strict with yourself.
Speaker 2 (08:44):
Yes, self control, But also it's about having a good memory,
not necessarily a good memory of bad things that happened
to you, but witnessing other people. So remembering God, I remember,
you know, my best friend went through a really hard time,
and you know, he or she didn't have an emergency
money and they had to move back home or they
had to sell their house. You know, those sorts of
(09:05):
things like capitalizing on someone else's lesson can be really
powerful and helping you stay focused and motivated and having
that sense of discipline because you build a sense of
respect just to what that buffer account or that emergency money,
whatever you want to call it, provides you, and it
will help you take away that temptation where you go
(09:27):
to spend it because you're like, no, I don't want
to end up like that personal I remember this happened
to me a few years ago, and I was so stressed.
Speaker 3 (09:33):
I was so anxious. I'm never going to let that
happen again.
Speaker 2 (09:36):
I'm learning, I'm growing, I'm leaving that behind in my past.
So it really is about focusing on the benefit of
that money so that it's not even a temptation.
Speaker 3 (09:45):
It's no negotiable.
Speaker 1 (09:46):
As I said, Okay, we're going to take a quick break.
When we come back, I want to talk to you
about budgeting methods. I want to talk about the idea
of setting yourself a pretend salary.
Speaker 2 (09:56):
Well, you're talking about my drip feed technique, so that
you get ready for that helpful.
Speaker 1 (10:02):
Drip feed, and then also this idea of automatic savings
transfers and whether you can kind of automate the process
so that you don't have to think about it and
don't stress too much. There's actually a lot to get through,
isn't there. We'll take a quick break and come back
in a moment and do that. Can We're talking about
(10:24):
how to save when your income is unpredictable, And as
you said, this is bigger than the gig economy. This
is any kind of freelancers or anyone on commission based work,
or anyone in casual work or anything where your shifts
might vary and your income might vary. So this is
actually a lot of people budgeting methods. Okay, is there
anything that works better for say, for gig workers, freelancers,
(10:49):
et cetera.
Speaker 2 (10:49):
So welcome to my lesson on my drip feed technique.
So what you do is you put all of your
income into the one account, and you know it doesn't
matter where it's come from, you know who from how
much it all goes into the one account. You would
then pay yourself initially a small set salary per week,
(11:13):
per fortnite, per month, whatever you would prefer to help
you manage your cash flow, and that obviously accounts also
for tax as well if you are self employed. But
it basically it takes it creates almost like a fake
salary for yourself, but it creates consistency in your income,
which for a lot of people will make it a
(11:33):
lot more a lot easier to actually manage the cash flow,
which is one of the key foundations of actually financial
good financial management.
Speaker 1 (11:41):
And so you're pretending then that this set salary is
what then goes on to pay for all of your
other bills.
Speaker 2 (11:48):
Ess all the normal all your normal living expenses and bills.
And I recommend people started off as low as they
can to help build up that account because it may
take a couple of months to actually build up a
decent balance, but you and then you can review it,
so you might go, okay, well, I'm going to take
five thousand dollars per month as a net salary and
obviously accounting for a pay as you go tax depending
(12:09):
on your if you're self employed or not. So then
you would sit with that for a couple of months
learning how to live off with that as a set salary.
Then say in a month or two time or next quarter,
you look at that and go, can I give myself
a pay rise? Perhaps I can afford to actually give
myself now six thousand dollars per month. Again, you've got
to account for the increase in tax that you can
prepay to the ATO if you want, or put into
(12:31):
a separate savings account, so that you are allowing giving
that account the time to actually build up, so that
you have a decent amount set aside, and that money
keeps on flowing. And again you can review it. You
might need to slightly tweak it and change it as
your situation changes, your needs change. But it is a
great way of taking away that sense of instability that
(12:55):
comes from an irregular, volatile income stream.
Speaker 1 (12:59):
A cash flow, all right, And at the same time,
this float essentially would be expanding.
Speaker 2 (13:06):
Yes, yes, And that's when if you see, for example,
I might do this for a couple of months and
I think, I see, okay, well I've actually now I've
got instead of having say fifty thousand dollars in savings
for my drip feed technique, I don't need as much
as that I might reduce it accordingly, or am I going?
You know what? I know that there's some really tight
months coming up, and I could be without a job
for a lot longer than I initially thought. I actually
(13:26):
need that base amount to be a lot higher, around
say seventy thousand. But the point is you're regularly engaging
with it, but you're creating almost like a pretend salary
for yourself.
Speaker 1 (13:39):
I really like that. The problem that I see with
it is the potential to dip into that float when, if,
and when you need it. And I suppose this probably
comes back to a discipline thing.
Speaker 2 (13:56):
Well, that's about to say like it is a big
responsibility to manage your cash flow. It is not something
to be disregarded. You do need to track and regularly
check your cash flow, and you really need to connect
with your why, which is why I refer to learning
from previous mistakes, or learning from other people's previous mistakes,
(14:17):
so that you can take on some wisdom here. And
you know, a great way to stay motivated is to
look at.
Speaker 3 (14:25):
Making it as visual as possible.
Speaker 2 (14:27):
And I see this a lot in the debt free community,
where people have created like charts and graphs and envelopes
and stickers and you know, really made it incredibly visual
and colorful.
Speaker 1 (14:38):
You know.
Speaker 2 (14:38):
And they've done it in a digital way through canber
or they've got stuff on the fridge to help them
see their progress. And I always say, like progress fuel success.
When you can see, okay, we're building up that buffer amount,
or you know, we're ready to take a bit of
a salary increase from our drip feed technique, you can
actually see that it's working. The debts are coming down,
you're actually engaging with your finances. You're a lot more
(14:59):
You've got a lot more skin in the game, You're
a lot more emotionally engaged, committed connected. You can see
it's working. The hard work's paying off. That's only going
to fuel that determination and commitment to keep it going
and make sure this continues on working for you.
Speaker 1 (15:13):
Okay, And does that big float from which you pay
that that drip feed kind of salary, does that replace
the emergency fund or are you separately feeding into an
emergency fund.
Speaker 2 (15:27):
Look, it really depends on your situation and what your
financial responsibilities are. Ideally, in a perfect world, you have
emergency money separate as well as your drip feed float
system happening as well. So yes, they are different, and
I probably confuse the listeners and yourself Michael by Court
referring it maybe as an emergency money. Technically they are separate.
(15:51):
This is to help manage your the inconsistency of your income,
and I rarely see it well. To be honest, I
have never seen anyone be able to manage irregular income
successfully without this technique.
Speaker 1 (16:06):
Okay, so that's how important.
Speaker 3 (16:08):
So I smoke up my own ass. But yes, that's
quite the image, isn't that?
Speaker 2 (16:12):
But because I know it works, and I know with myself,
especially when I started my own business years ago, like
I was, I was twenty six, twenty seven, and I
had a mortgage. I had a lot of risk on
my shoulders and I was paid quarterly. Wow yeah, and
it took three months before I got my first paycheck.
So this is what I did, and it worked, and
(16:34):
I still swear by it today.
Speaker 1 (16:36):
I have experienced this as well in book publishing. Yes,
when I published my first novel in twenty twenty three,
and it is essentially payments related to that, I staggered
almost over not two and a half years, which means
(16:56):
that you have to budget and manage that cash, which
is just such a challenging thing to.
Speaker 2 (17:02):
Do, and it's also time consuming as well. That's why
I like the system is because all the money goes
into the one bucket.
Speaker 3 (17:07):
There's none of this.
Speaker 2 (17:07):
Okay, when I get this check from here, I'll put
it to that, When I get this deposit here, when
that money comes in on when that gets paid, I'll
put it here and there.
Speaker 3 (17:15):
It just put it simplifies it.
Speaker 2 (17:17):
And you know, if you are juggling multiple jobs like
it's the gig economy, or you're juggling lots of things
in life, as we all are, this just makes it
really clean and really simple. And I think that's what
we over complicate things by having multiple accounts. I'm looking
at you, Michael, and you know we don't need to
just keep it simple so that you were engaged with it,
(17:38):
and you don't because it's easy to understand. You don't
put it off either.
Speaker 1 (17:42):
You are going to be so proud of me. I
have not told you this recently, please the under seventeen
because in the past we've talked about the fact that
I had twenty six bank accounts, right and then you
got that. You put me on a bank account diet
and told me I wasn't allowed to open any more,
and I got it down to what I thought was nineteen,
(18:02):
and then it went back up to twenty two because
I found some more. The other day, I consolidated a
whole bunch of bank accounts and I am now down
to let me it is fifteen.
Speaker 3 (18:23):
I am really proud of you right now.
Speaker 1 (18:25):
It is. In fact, it could actually be better than
that because.
Speaker 3 (18:28):
I see progress, feel success. So you are evidence.
Speaker 1 (18:32):
Yeah, it is, and it is all about just trying
to improve that cash flow, the visibility over cash flow.
And so this has been a really interesting process talking
through the drip feed system. I mentioned automatic savings transfers.
Really you can part of this is automated, then, isn't it.
If you are doing this drip feed system, then you
are paying yourself that same salary every single week, which
(18:56):
is an automated thing you.
Speaker 2 (18:57):
Can set up automated. But this is the thing, and
you did ask me this question which we haven't touched on,
but the automation. Automation is great because it obviously takes
it's one less thing for you to have to do,
but it also can make us maybe a little bit lazy, okay,
and hold us back from actually achieving our true potential. So,
(19:17):
for example, say I have you know, two hundred dollars
per month regular savings plan to build up you know,
my my emergency money. For example, if I have an
irregular income stream, I could potentially save more so and
which means I could build up my emergency money number
(19:39):
a lot faster. So by having that money staying in
my account, I could be actually transferring three hundred dollars
per month or four hundred dolls per month. But I
don't I to stick to this automated system of two
hundred dolls per month. I'm probably gonna go and spend
that one hundred two hundred dollars a month that I
actually could afford to put aside. And that's where I
think the danger lies because.
Speaker 1 (19:58):
To get into that that the challenges with the percentage
system that we talked in the first part.
Speaker 2 (20:02):
It but also we don't actually look at our numbers,
and that's what we need to be doing. We need
to be checking our accounts, we need to be checking
our transactions, and we need to be making sure that
we're doing the best we can obviously, but whilst enjoying
a healthy balance in life.
Speaker 1 (20:15):
Okay, Look, the drip feed system is just such an
interesting way of operating.
Speaker 2 (20:21):
I explain it actually in so much more detail in
my book Mindful Money.
Speaker 3 (20:26):
I even have like charts and graphs.
Speaker 1 (20:27):
Okay, it's very helpful. And I think we talk then
about that that is not just helping you save, that
is helping budget at the same time, and in doing
so you may well be able to allocate money not
just to your emergency fund, but also to investing exactly
and help get you ahead. Okay, comprehensive. And I like
(20:50):
the fact that you pointed out this is bigger than
just the gig economy. This is so many people who
I mean, it almost feels like people with a fixed,
stable income are in the minority these days.
Speaker 3 (21:02):
Yeah, I agree.
Speaker 1 (21:03):
Yeah, very useful. Okay, where do we find you if
we need more information?
Speaker 2 (21:06):
Well, if you have any questions about my drip feed technique,
just send me a damn on Instagram at sugar mom
My TV and I'll come back to you as soon as.
Speaker 1 (21:12):
I can and you can hear me every day with
Sean Aylmer on Fear and Greed Business news you can use.
Thank you very much for listening to how Do They
Afford That? Remember to follow on the podcast, and the
best thing that you can do is tell somebody else
send them a link to this episode if you think
they might benefit and help spread the word about how
do they Afford That? Thank you for your company. Join
us again next week.
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