Home Business Tips

Managing The Income Fluctuations of a Home Business

Starting a home business can be a tremendously challenging and rewarding experience. It is one of the rare career moves that allows you to chart your own course, doing what you love while living your life the way you want to. That’s a likely reason that almost one million Australians have chosen to make a home-based business their primary income generator.

Even though it’s possible to make an excellent living while working out of your home, however, there is one major reality that many people don’t consider when choosing it as a career path: the fact that their income will probably be more uneven than they’re used to.

When counting on a home-based business to pay the bills, making sure to account for fluctuations in the income it generates is essential. Those that don’t can find themselves overwhelmed by expenses and be forced to abandon their plans in favour of a conventional job with a steady paycheck. To keep that from happening, here are four useful steps to manage the income fluctuations of a home-based business.

Know Your Essential Expenses

The first thing to do to make sure your home-based business will meet your financial needs is to know what they are. To do that, first, create a budget that accounts for your current level of spending. Make sure to include everything, from essentials to discretionary costs. Then, strip away all but the things that you must have to survive each month, including:

  • Housing Costs
  • Utility Costs
  • Food
  • Transportation
  • Childcare


Everything else – from pay-TV services to internet and mobile phone plans should be eliminated or minimised to the greatest possible extent. The total you come up with represents the absolute minimum your home business must yield each month.

Create an Emergency Fund

Once you know how much money you need each month to survive, the next step is to create an emergency fund. The amount you put away should be based on your essential expenses and should be enough to cover between three and six months with no other income coming in. That way, if you lose a big customer or hit a dry spell with your home-based business, you will have enough of a cushion to get by without having to panic or abandon your business plan. With any luck, your emergency fund will never be necessary. If it ever is, however, you’ll be relieved to have it.

Set a Defined Salary

When your home-based business is going well, you may be making far more money than you need to live on each month. To avoid the temptation to overspend, set a monthly salary for yourself that’s enough to cover your essential expenses plus some overhead for discretionary spending, like entertainment and the like. This arrangement should become inviolable. When you’ve spent your salary each month, you should never draw additional funds from your business, except in extraordinary circumstances. The money you leave in your business account is a form of insurance against slower months – it will be there to cover your salary in the future, if necessary.

Become Financially Literate

With your income and expenses under control, the final thing to do is find ways to maximise your earnings using the leftover income your business is generating. Consider taking some financial planning courses to learn all about investment strategies and other ways to streamline and optimise your personal budget. Doing so will increase your efficiency in the ways that you use the money your home-based business generates. It should also help you to manage your superannuation and retirement portfolio in the most effective way, which will allow you to retire in comfort, after putting as many years as you want to into your home-based business.

Plan Ahead, Stick to Your Plan

The most important part of managing the income fluctuations of a home-based business is to make every effort to adhere to the plan you’ve created through the steps outlined above. In good times and bad, that will create the kind of financial consistency that makes it possible for you to thrive. It won’t be easy, mind you – there are always reasons to alter your plans – but having the willpower to avoid doing so will pay off in years of sufficient and reliable income generation by your home-based business.