How You Can Save, Pay Down Debt, Retire And Spend

Every individual is bound to retire sometime, which makes retirement planning an essential attribute right from when you start to earn. This makes it vital to understand the few basics that can help to plan ahead in order to save, clear debt and spend as you wish.

It’s hard enough to stay on top of your finances when you are employed full time, and have an employee savings plan, automatic tax deductions, employee health insurance, a 401(k), etc. As an individual with irregular income, you have to handle everything on your own, and hence, you need to pay even greater attention to your financial matters.
These involve better managing your irregular income for future retirement savings, emergencies and probable expenditures, as well as avoiding late tax payments.
Here are some important tips and retirement savings options to consider as you manage your finances.

Emergency Savings for a Rainy Day
If you are someone with irregular income, chances are you might run out just when you really need funds, unless of course you’ve managed to save for future emergencies. It goes without saying that emergencies include all basic living expenses from utilities, groceries, rent and transport, as well as medical expenses.
It’s ideal to have easily accessible savings that can accommodate all possible emergency expenses for at least a year. Start with saving for six months of expenses, and put anything over that into an investment account. You must also have health and disability insurance to avoid running out of funds, especially considering the soaring costs of medical aid.

A Curveball Fund (Separate from Your Emergency Fund)
Ok, so you have saved up for emergencies, but what about the small hiccups that keep coming around? These could range from car trouble or a hole in the drainage pipe, to a sudden, once-in-a-lifetime travel opportunity with friends or family — you get the general drift, right?
A curveball fund acts as a reserve, for which you simply need to open up a savings account that can help you subdivide your funds for various goals, whether they’re curveballs or basics.

Retirement Savings Options
All financial experts advise that you start saving for retirement as early as possible. Individuals with irregular income must in general save at least a minimum of 10 percent (if not 20 percent) of their income as their future retirement savings. There are plenty of retirement savings options available, the most reliable of which are the IRA and 401(k).

Contributing the maximum of $5500 to an IRA ($6500 if you are above the age of 50) can help a great deal, for your investment is taxable in the now and not once the money is withdrawn post-retirement. As for those of you who earn fairly well and wish to invest more than $5500, a 401(k) is a better retirement savings option.

Debt Management
Even though it’s every individual’s dream to be debt-free at some point, it’s very likely that your debt will catch up with you. In the midst of a money crunch and piling-up debt, it is paramount that a large part of your income goes towards savings, to avoid further debt at higher interest rates.

No matter how much you hate having debt, think twice before using up all your income to pay it off. The best way to go about this is by making a list of debt with higher interest rates as compared to lower ones, and doing away with those first, since you can afford to hang on to the lower interest rate debt for longer periods of time.

Personal Expenditure
When it comes to irregular income, there is pretty much little to no room for lavish personal expenditure (unless you are bringing in the big bucks). Of course, this doesn’t mean that you can’t spend at all, just that you must prioritize your personal spending.

For some, travel is important and for others shopping, but remember to consider whether there’s something more important that can be done with the funds instead. Still, save a little pleasure reserve every month, so it doesn’t seem like mission impossible when you want to pamper yourself!