Karen and Juan are friends, she is a health professional and has had her own practice for a few years, and Juan is a commission salesperson, both have variable incomes and although they always seek to earn more money, sometimes they only manage to cover their expenses, but not save.
Of the employed population in Mexico, 60% have an informal job. Many people who are in the informal economy work for fees, projects, commissions, tips, or in some venture, so their income tends to be variable, which makes it difficult to keep their personal finances in order; however, the benefits that financial planning can provide can be many.
Valeria Arellano Delgado, a personal finance specialist, explained that in order to carry out financial planning with variable income, the first thing that must be identified is how the income is obtained, that is, through a business, commissions or fee collection, when knowing the data can be recognized which is the factor on which more or less income is received depends.
For example, a business may be affected by temporality, while whoever receives commissions or charges for projects or fees may depend more on the hours they work.
Recognizing what factors affect the variation of our income will help us to generate an annual financial plan and with it foresee strong expenses or seasons of low income; For example, if it is known that for a business December is a season where you can have more income, but January and February are not, it is best to moderate expenses. Gerardo Obregón, director of Prestadero, recommended creating a savings fund which serves as support when income is lower.
Expenses
Having variable income, there is uncertainty about the amount of money that will be available the following month and if that amount will serve to cover all expenses, Gerardo Obregón explained that when faced with a variable income, it is advisable to have a forecast about the expenses that exist on a monthly and yearly basis.
For this, a list can be made of the expenses that are fixed, for example, on an annual basis, the property and water payment can be taken; In the case of annual expenses, the amount and the date they must be made can also be taken into account, this will help when receiving an income to allocate an amount as savings for annual expenses.
Valeria Arellano, explained that in the case of monthly expenses, having a variable income, three scenarios can be carried out in which living with a minimum, realistic and optimistic income is contemplated, this will help identify which expenses can be cut if they decrease entry.
To carry out each scenario, he recommends making a list with the monthly expenses and ordering them by priority, in this way it is possible to identify which are the basic expenses and those that are less necessary expenses, Arellano proposes to group the expenses in the different groups to know what is the amount of money needed in each of the three scenarios.
To these amounts must be added the amounts of savings, either to build the emergency fund or for some financial goals such as going on vacation, buying a car or saving for old age.
Arellano explained that by carrying out financial planning on an annual basis, knowing what the variation in income depends on allows not only to avoid debt or live while waiting for the next income, but also to manage time to have hobbies or vacations, that is, if it is known that there are seasons where there is less income, you can anticipate and save even to take vacations during that season, without affecting personal finances.
