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What is your money cycle?
What time of the year do you spend your money? What time of the year do you make your money? We all have our hobbies, activities, and income sources. For some, money is not always coming consistently or going out consistently. There tends to be money cycles for most people even if you have a consistent paycheck.
Understanding your seasonal money cycle will improve your financial well-being. The benefit of knowing your money season is being able to be on top of your budget and not getting caught off guard. When we get caught off guard, we get ourselves into money trouble and it is a lot harder to come back than to stay ahead.
Different Money Cycles
Money Cycle – High Intensity and Short Duration Jobs
You make most or all of your money for the year in a short-time frame. You work really hard when the opportunity to work is there but don’t have the opportunity to do so the entire year.
Examples: Fisherman, Holiday Focused Jobs, Farming, Builders, Mining, Tax Advisors, Realtors (typically busiest in summer), Oil Industry
How to Handle: Enjoy your time off with a moderate spending budget and one or two bigger expenses. Don’t overdo spending at the beginning of your downtime. During this period you make your income, work hard, and aim to be conservative with your spending. It is often easier to cut back on spending when you don’t have time to spend it, but be careful of online shopping. This type of job requires more foresight and discipline with budget habits. Remind yourself to not overdo either area by working too much or cutting out too many expenses. While it is good to save and make money be careful not to burn out.
Money Cycle – Seasonal Jobs
As the name applies, you work seasonally for a portion of the year when your job allows it. Seasonal workers most often will change to another income source a few times a year. Work hours may range from normal to more during the job season.
Examples: Ski Industry, Teachers, Recreation Industry, Tourism, Landscaping, Snowplowing/Shoveling, Some Restaurants
How to Handle: There is often part of the season when you don’t have as much income coming in. Mountain towns often call this the mud season because tourism has died off and activities are switching from winter to summer. You need to make sure you always got your bare essentials covered for a few months during lulls. This requires saving a bit extra during the work seasons. You can maintain a moderate spending lifestyle while the work season is going as long as you are saving to pay for the bare essentials later. One better idea would either be working harder or cutting back on spending while the work season is going to maintain a moderate spending lifestyle instead of running off the bare essentials during the lull.
Money Cycle – Steady Jobs
These jobs are very consistent with paychecks only varying a small bit between pay periods. It may mean a salary job or a year-round job where work is always there. You aren’t dependent on commissions or bonuses. Income may fluctuate a bit due to side gigs or vacations if unpaid.
Examples: Most Jobs fall into this category where you work a set amount of hours each week all year.
How to Handle: This is the easiest job type to manage budgets and savings. You have the flexibility to always maintain consistent spending and saving habits. With the predictability of this job, you have the flexibility to sometimes spend more or save more depending on your interests, needs, and goals.
Money Cycle – Performance Paying Jobs
While all jobs review your performance, some jobs will base 100% or most of your payoff on your performance. Commissions and bonuses or a combination with base pay are the types of jobs in this category. There may be good-paying months and not-so-good-paying months. The predictability may not be that certain either.
Examples: Sales Related Jobs, Entrepreneurs, Freelancers, Gig Workers, Musicians, Artist, Restaurant Jobs
How to Handle: You are in an unpredictable job, and it takes diligence to stay on top of your money. It is easy to be sloppy with your budget but try to keep up with it. You may need to reconcile your budget at the end of the month.
Start building a cushion in your budget. By this we mean to be conservative with your spending at first and budget at least $500 less than what you predict to make in the month. If you have a higher-paying job, you may try to create a budget that is $1k to $2k less than what you predict. After the first few months and you have built a surplus, carry that over as the months go on and go back to a moderate spending budget. If you have a slow month with income, then use the surplus you built up. If you run out of your surplus then start the steps over.
Final Words
We hopefully have helped shed some light on your money cycle. No matter what your money cycle, keep up with budgeting and maintain a healthy amount of savings. Money is one of the top stressors in people’s lives and when you are under duress, it is easy to ignore tackling it. Face the challenge head-on as stress leads to higher cortisol levels in the mind. Higher cortisol levels are correlated with obesity, fatigue, infertility, irritability, and depression. We are not trying to scare you but to inspire you to improve your life!
Colorado’s best financial coaches, financial planners, and daily money managers are ready to increase your financial well-being and get you from point A to B book a time to have a chat about your financial situation.