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Everyday Cheapskate: Mystery Means

Mary Hunt

If you look to commission sales or a form of self-employment as your sole source of income, you may know what it's like to live on a roller coaster. Some months can produce absolutely no income. Then a deal closes or you have a pretty good month, and it takes nearly all of that income to get caught up. Feast or famine pretty much sums it up.

People who have this kind of "mystery means" typically believe it is impossible to live within a budget because they never know how much money they will receive from one month to the next.

The thing about being self-employed is that you have to change the way you think about your income. You have to take on the role of being both an employee and an employer.

As the employee, you need to honestly determine the lowest reasonable amount you can accept from yourself as monthly compensation. Let's say, for example, that figure is $3,000 a month.

Then you open a separate checking account, into which all of your income is deposited. This is your "business account," not an account from which you write checks for groceries or household utilities. As the business brings in irregular revenue, the money goes into the "business account," from which you pay the bills of the business. You pay yourself out of this account. No matter how terrific an employee you are, you cannot be allowed to put the business revenue directly into your personal account. You are operating a business, and it must be treated on a professional level.

Now switch to the role of employer. You have to be stern and immovable when it comes to paying your one employee. You, the employee, cannot expect a raise every month. Your salary is $3,000 (or whatever the amount is that you have negotiated previously) on payday, and that's it.

Consider this your "steady income." Sure, you might try to persuade your "boss" to part with a bonus now and then, but you will live to regret it. You must find a way to live within the amount of salary that you, the employer, have agreed to pay you, the employee.

If you are careful, your business bank account will begin to show a healthy balance, which is going to have to pay you that $3,000 a month even during months when business is very slow. You always are building up a reserve to carry the business through lean times.

If things begin to go well, you might consider sitting down with yourself to negotiate a raise, but weigh the pros and cons. Move back and forth between being a prudent businessperson and a needy employee.

As one who has been self-employed for many years, I can tell you there is little in life that is more personally satisfying, but at the same time, it's challenging. The secret is learning to live below your means, no matter how erratic those means might be!

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Mary Hunt is the founder of DebtProofLiving.com and author of 17 books, including "Debt-Proof Living." You can e-mail her at mary@everydaycheapskate.com, or write to Everyday Cheapskate, P.O. Box 2135, Paramount, CA 90723. To find out more about Mary Hunt and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

Copyright 2008 Creators Syndicate Inc.

This news arrived on: 09/08/2008

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