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If you're a freelancer, collect commissions, or work irregular part-time hours, your income varies. You could see $5,000 one month and only $500 the next. Income fluctuations make it tough to create and stick to an annual spending plan. Our solution?

Forget about making one plan and instead opt for 12 monthly plans. According to Dave Ramsey, author of The Total Money Makeover, monthly income minus monthly outgo should always equal zero. A new plan for a new month ensures you're working with realistic numbers and are better aware of where your money is going.

Allocating your paycheque, before even getting paid, also helps you prioritize your spending. In the lean months, you're forced to run through your priorities list: rent, house bills, debt, then savings, and match up available income as you run down the list. If this month's income only allows you to pay off two items on the priority list, you know where you can and can't spend. If unexpected expenses pop up mid-month, like a friend's forgotten birthday or a furnace repair, you must reduce spending in another category so you're still hitting a zero balance.

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Drafting a new plan at the beginning of the month to match up your fluctuating income with your expected expenses, encourages you to be a mindful spender. It also lets you see the real numbers, which could be a major motivator to earn extra income so you can meet not just your basic needs but afford those extra luxuries.



Angela Self is one of the founders of the Smart Cookies money group. Read her weekly column on managing debt and saving money at globeinvestor.com.

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