I Will Teach You To Be Rich: No guilt, no excuses - just a 6-week programme that works

by Ramit Sethi

If you have irregular income: I know lots of freelancers and others who earn £10,000 one month, then nothing for the next two months. How can you deal with spikes in income? Good news: this system will accommodate irregular income with no problem – you just need to take an extra step. Here’s the quick summary of what you’re going to do: in months where you make a lot, you’re going to save and build a buffer for the slow months. Over time, you’ll build enough of a buffer that you can simulate a stable income, letting you use this system as designed. Even in slow months, you can pay yourself from your buffer. Here’s how you do it. First – and this is different from the Conscious Spending Plan – you’ll have to figure out how much you need to survive on each month. This is the bare minimum: rent, utilities, food, loan payments – just the basics. Those are your bare-bones monthly necessities. Take a second to write it down. Now, back to the Conscious Spending Plan. Add a savings goal of three months of bare-bones income before you do any investing. For example, if you need at least £1,500/month to live on, you’ll need to have £4,500 in a savings buffer, which you can use to smooth out months where you don’t generate much income. The buffer should exist as a sub-account in your savings account. To fund it, use money from two places. First, forget about investing while you’re setting up the buffer, and instead take any money you would have invested and send it to your savings acc...