Nowadays, many people have taken on jobs that veer from the traditional work older folks are used to. Where careers as architects, engineers, doctors, and other similar stable jobs used to be the norm, we are now seeing an influx of freelancers in the gig and contractual economies.
Because technology has grown by leaps and bounds over the past couple of decades, many people have now been exposed to more flexible work options. And while they offer more freedom—and in many cases, financially rewarding opportunities—it can be challenging to manage irregular income, especially when debt is concerned.
Understanding Your Financial Situation
One of the key ways to efficiently manage debt on an irregular income is fully understanding and embracing your situation. If this path is your choice, understand that a budget approach based on regular income will not work for you. A more flexible spending plan is the way to go.
The Monetary Authority of Singapore (MAS) offers free tools to help you track and categorize your expenses versus your fluctuating income. Face the brutal facts about your situation. There will be seasons when your cash flow will be plentiful, and then there will be times when it almost feels like a drought.
Facing the realities of your financial situation lets you create a practical budget that adapts to your irregular income cycle.
3 Effective Loan Repayment Strategies for Irregular-Income Borrowers
Effective debt management for irregular-income borrowers is still possible with the right strategies. With thoughtful planning, you can easily repay your debts to any lender, whether it’s a bank or an authorised money lender.
1. Build a Cash Buffer
Since your cash flow doesn’t follow any regular calendar, we recommend building a safety net during high-income months. This means setting aside money into a savings account for emergencies and loan repayments. Utilize tax rebates like the GST Voucher or Workfare Bonus to get started. Having this cushion helps you cover your bases during months of financial drought.
2. Take on High-Interest Debt First
The next best thing to do for those involved in freelancing and the gig economy is to strategize loan repayments. Loans come with different interest rates and payment terms. We recommend prioritizing those with higher interest rates. Doing this lets you mitigate the effects of high interest rates on your finances.
Consider debt consolidation to streamline all your debts, consequentially making loan repayments much more manageable and saving you more money.
3. Maximize Income During Lean Months
Having a fluctuating income isn’t an excuse to slack off during lean months. Before your projects or contracts end, start looking for other potential work that aligns with your niche. Many short-term projects and part-time work are available that will fit your skills and schedule. Take advantage of online job search platforms for additional income.
You may also look into government initiatives, like the Self-Employed Income Relief Scheme, to help offset tax burdens and get some temporary financial relief.
Wrapping It Up
Managing debt with non-traditional income sources may seem problematic, but with careful planning and motivation to conquer debt, it is quite possible to achieve financial stability. Taking control of your finances is a big factor in your situation. The right approach and discipline can turn things around for you.