How to Save for Retirement When Your Income is Inconsistent
If you’re an entrepreneur, you’ve probably stressed out about how to save for retirement when your income is inconsistent. Even with a consistent income, people have difficulty saving for long-term goals such as retirement.
But if you run your own business, it can be significantly more challenging to save regularly for your golden years. Strategies that work for most income earners might not work so well when you’re working for yourself.
Before we get to the strategies, let’s go over the most critical element of a successful retirement savings plan: Commitment.
You have to get your mindset straight about the importance of saving for retirement. One way to do that is to get out of denial and into reality about what it will take to retire comfortably. You can do that by running your retirement numbers.
Here are three websites that offer retirement calculators.
Once you know what it takes to retire, you’ll have an easier time staying committed to savings. You’ll go from being a Spender to a Saver. That’s what happened to me!
Next, try these strategies save for retirement – even if your income is consistent.
#1 – Start small if you like, but get started. Many entrepreneurs falsely think that it’s a waste of time to save small amounts of money. Even if you can only save $10 each month, it’s a start. Attempt to add to that amount each month.
Getting into the habit of saving money is the most critical first step.
#2 – Create your version of direct deposit. One great thing about working for a large company is direct deposit. It’s easy to send part of your paycheck off to a savings or brokerage account before you ever see the money. As an entrepreneur, you can create a similar system.
Set up your checking account to transfer automatically a specific amount to a retirement savings account at regular intervals, either monthly or weekly.
#3 – Save more every chance you get. Some businesses are seasonal or inconsistent. When revenues are scarce for a while, and then it picks up, it’s natural to want to spend more. Don’t fall into this trap. When things are going well, save as much of that extra income as possible. Also, look for creative ways to add more to savings.
I had a client who became a divorcee and lost her ex-husband’s income. In addition to her business, she decided to take on a part-time job solely to devote that income to her retirement savings. Yes, she was busy and tired most weeks, but she felt proud of her efforts and confident that she had a retirement savings plan in place.
#4 – Eliminate unnecessary expenses. Even if you’re a million-dollar income earner, it’s foolish to waste money on unnecessary items and services. For most entrepreneurs, it’s wise to consider cutting out anything you don’t need.
Once you fund your retirement, you can relax and spend more on other things.
You may enjoy this article: How Much Income Will You Need in Retirement?
#5 – Learn how to create a budget. Building a retirement fund is vitally important, but without a handle on your expenses, you’ll find that most often there’s nothing left to save. Look back at your expenditures for the past year. Now consider your lowest income months. Build a budget with your lowest month of revenue as a starting point. After all, if you can survive your lowest month of income, the rest of the months will be doable.
#6 – Create an emergency account. The best way to be prepared for low-income months or unforeseen expenses is to have an emergency savings account. Dave Ramsey, author of Total Money Makeover, suggests starting with $1,000. After you reach the initial $1,000 mark, keep going until you build up to six to twelve months of living expenses. Achieving your savings goals could take some time, so keep your eye on the mark. Don’t let yourself get overwhelmed or discouraged. Get used to the idea of always having a meaningful financial goal to achieve.
#7 – Get started immediately on your savings plan. When it comes to saving for retirement when your income is inconsistent, there’s no time to waste. If money is tight, these may be challenging tasks at first. Start small. Baby steps are allowed.
Once you put the proper foundation in place by implementing the above strategies, you’ll gain more and more confidence in your ability to retire comfortably, and you’ll significantly reduce financial anxiety. Before you know it, you’ll be in the habit of saving for retirement even if your income is inconsistent.
Now that’s financial empowerment!
Hello! I’m Patti Fagan! I’m a Christian Business & Life Coach, Ramsey Solutions Master Financial Coach, former retirement planner, and digital creator. I’m also an award-winning author and prayer warrior, serving on the prayer team at my local church.
I provide digital content and resources to support my sisters-in-Christ in their finances, faith, and business. I’m on a mission to help you create six-figure success while honoring God and sharing your gifts with the world.
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