Counting Pennies

Provided by Ethan Ewing, president, Bills.com in San Mateo, California

Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine’s Hot 100 list of the fastest-growing U.S. companies. 

1. People whose income fluctuates need to learn to adopt a longer-term view of finances than someone with a regular paycheck coming in each week or month. Generally, after a few years of fluctuation, people can observe patterns – a slump around the holidays or in the summer, for instance – as well as determine a typical monthly minimum income level. Then budgeting, spending and saving can be done with that “base” in mind.

1. Set baseline goals. A self-employed individual could establish an absolute baseline of sufficient savings to cover expenses such as quarterly estimated self-employment taxes and an emergency fund. Common wisdom suggests keeping six months’ living expenses in an emergency fund at all times. For those with fluctuating incomes, this fund can become a “floating” fund to pull from during leaner times, then replenish when income increases.

1. Try “zero-based budgeting.” Everyone has fixed monthly expenses such as rent/mortgage, as well as consistent variable expenses (those that occur each month, but fluctuate, such as food and some utilities). Some people accumulate savings by holding off on discretionary purchases until they achieve a certain level of savings. Then, continue to save and allocate a portion of that savings toward a planned seasonal purchase.

1. Stick to a percent. With each check received (whenever that is), set aside a pre-determined percentage, based on your budget, for savings and investment.