Survive on a Sporadic Income

Like company pensions and gold retirement watches, full-time employment and steady paychecks are starting to seem like quaint relics from financial eras of yore.

If you're a small-business owner, contractor, freelancer, or otherwise your own boss, you already know that it's harder to budget when your income irregularly ebbs and flows. Still, too often this important task gets pushed aside as you tend to other vital tasks, like scaring up some work and making a living.

There's a lot you can do to smooth out the income highs and lows, say the folks at debt-counseling firm Money Management International. Here are some of their tips, as well as my own, on keeping the cash flowing:

Average out your expenditures over a three-month period. If you're not already tracking your expenses, start now. Don't forget to include the monthly costs of health-care premiums, taxes, and office supplies. Knowing where your money really goes will help head off any end-of-the-month surprises.

If you bank electronically, your checking account and credit card statements will help you get a ballpark figure on what you spend each month. Take a three-month snapshot of your spending, and come up with an average monthly outlay. Now you know what it takes to run You, Inc.

Free up your cash flow by regulating your expenses. Many utility companies offer balanced billing options, so that horrendous winter heating bills and those summer A/C shockers get spread out evenly over the year. For big-ticket items -- like a child's tuition, or a vacation, or a new water heater -- create your own balanced savings plan by setting aside a chunk of what you need every month to cover these expenses and socking it away in a separate account.

Speaking of Which ...

Build a safety net for lean months. Whether your emergency cash cushion is enough to cover three, six, or 83 months of living expenses depends on your situation. Just remember that the more people who depend on your income for survival, the bigger your cash stash should be. Start putting money into a short-term savings account today, even if you can commit only a minimum amount -- say, $20 here and there. And keep this money separate from the funds you use to cover everyday expenses. That way, you'll be less tempted to skim money off the top to spend on any fake "emergencies," like a really good electronics sale.

Regularly assess your tax situation. In a perfect world, you want to owe Uncle Sam nothing and have him owe you zip, too, come mid-April. The closer you can get to that scenario, the better, since you won't have to scramble for extra work to pay a tax tab. And of course, on the flipside, you don't want the IRS holding your money hostage when you could have put it to better use. Read all the rules and regs on taxes at IRS.gov.

Keep your credit in tip-top shape. Access to plastic is no longer a right -- it's a privilege. And in these days of tightening credit, you want to keep your nose clean and your credit reputation intact.

If money gets tight, putting expenses on plastic will be tempting. Try to resist: Red flags start to wave once you toe a 50% usage line. Instead, attempt to keep your debt to less than 35% of your available credit. If you do have to occasionally charge your expenses, promise to use any future windfall to get you back to debt-free ground.

Married to a regular-wage earner? Go and give him or her a smooch, and then discuss using your significant other's paychecks to cover the essentials (groceries, utilities, roof, and such), while you put the irregular paychecks toward savings and irregular expenses.

When you actually earmark your savings -- deciding how much goes into which account and what each part will be used for -- you get a feeling of control that feels a lot like the luxury of a regular paycheck.

Fool.com's Dayana Yochim Inc. did not receive any TARP, TALF, IOU, or XYZPDQ money from Uncle Sam. However, analysts are bearish on the company's quarterly earnings, which are expected to reflect both vacation expenditures and a fully amortized car-repair payment.