Do you feel like life was a little easier to predict when you were getting a steady paycheck? You knew how much you were going to get and when you were going to get it. You were able to match your expenses to what was coming in. If you’ve moved to full time streaming I’m guessing those days are long gone.
So how do you set yourself up to deal with the uncertainty around your income? Most of it comes down to establishing any control you can. We’ve got a couple tips and tricks that should make life a lot easier and help you focus more on streaming and less on managing finances.
Track Your Finances
First, you should set up your stream like a business. That means track what you’re earning and what you’re spending. It’s important even if you’re only getting small tips or a couple of subs because you’ll have to pay taxes on that income and don’t want to be surprised by your bill. In our taxes article we discussed using online accounting software but you can also set up basic income and expense reports in Excel or just do it by hand. The more you know ahead of time the easier it will be to predict what your income will be. Similarly, you’ll start to see patterns in your expenses and you’ll be able to adjust your spending to match so you aren’t short when you really need some new equipment. Remember, Twitch and YouTube income gets paid a month after you actually earn it so you’ll have to account for that lag time. You may eventually want to build in other income streams like affiliate products or merchandise that could be paid a little more quickly and consistently. Control must be maintained!
You’ll get a lot further if you track your personal expenses and accounts in software like Mint. If you can set it up so that your money flows automatically towards your expenses and savings then you’ll have a much easier time of things. Typically I like to have an automated amount flow in to my savings each month while keeping an eye on my other bills so I always have enough to pay them off fully. If I have it automated then I don’t have to make a decision to do the right thing each month, it just happens! It’s also a good idea to take note of what your fixed expenses are (the ones that are the same month to month) and what your variable (change month to month) expenses are. If you can get a strong handle on your fixed expenses and can predict your variable expenses with some frequency then you’re in a great position to be in charge of your finances. This is the same idea as tracking your stream like a business because the more you know the better you’ll do.
Live Prudently
You also need to build a personal emergency fund. This is your savings account that you only use for true emergencies, like unexpected medical bills or something that stops you from streaming. If you have a very steady income we’d recommend 3-6 months of core expenses saved in this account. So if you spend $2,000 per month on things you couldn’t drop if times were tough (rent, food, etc) you’d keep $6k-$12k. If your income is unsteady or you’re uncertain about how long you will be with your employer then we recommend you go to 6-12 months in your emergency fund. Put this fund in cash; while it’s nice to try to get it to grow you really are just looking for safety. We recommend going with a bank account that you keep totally separate from the rest of your funds. As you increase your expenses in life (it happens, if you somehow resist it you’re impressive as hell) you should monitor the fund to make sure it matches your needs.
Try your best to live lean! This is true for both your business and your personal expenses. Since you don’t know what’s around the corner with your income it’s better to live lean until you’re quite certain you’ll be making more than enough to cover your basic expenses. This can mean less going out, fewer trips, maybe more roommates than you were hoping for, or just delaying some purchases. It’s not fun, but it will help you a ton. I gave up buying Hearthstone packs, I make more chicken than steak, and my wife and I go out less than we used to. All in all, it’s not that bad. For me, I’ve found living lean to be an interesting challenge which forces me to think critically about all of my spending decisions. It’s become a game to see how low I can get our grocery bill, our energy bill, etc. If you can gamify your spending, even a small amount, you’ll see some serious improvement as well! I use Habitica to gamify my tasks that I don’t want to do, including spending habits, and that’s really helped reduce potential burnout from putting more mental energy in to my spending.
Here’s one most people don’t think about: pay yourself first. Yes, you need to cover your business expenses. However, you’re never going to grow your emergency fund if after paying for everything else you’re not left with any money! When paying yourself first start with filling up that emergency fund but after that you can move on to investing for your future or even using some of it as fun money. One of my most highly recommended books for personal finance is The Richest Man in Babylon and paying yourself first is one of the key lessons. When you pay yourself first you are forced to reduce spending or try to go out and make more to cover the gap. You’ll be shocked at how quickly your funds go when paying yourself first!
Plan for Good Times and Bad
Know what you’ll do with any excess and what you’ll give up when there’s a shortage. Again, this amounts to having a plan. There will be some months where you earn more income than you expect. Those are awesome! You need to be in a position to take advantage of it, regardless of the source of that income. After all, who knows what the next Twitch Prime will be? If you have a plan for what you’ll do with extra income, or even set up an on stream goal for a particular piece of equipment, you’ll be more likely to actually use it in a way that betters you or your stream instead of spending it frivolously. If you’ve built up a dedicated audience you certainly can make those on stream goals happen and really improve the quality of your stream. It’s a win-win for you and the audience.
Similarly, you need to know what you will do if you find yourself with a shortage. Maybe you weren’t able to stream as much so tips are down or you had a surprising number of people fail to resub. This is the less fun part of unpredictable income… but it’s certainly something that can be handled. First, decide what constitutes an “emergency” for withdrawing funds from your emergency fund. I’d recommend deciding on a dollar amount upfront that would trigger you to pull from the fund and to not touch it unless you are actually that short. Alternatively, you can look at which purchases you could delay since the funds aren’t there. This could be something personal or something for the stream, or a combination, but sometimes reducing expenses temporarily is the better course.
In general, if you have a plan ahead of time that you’ve created and committed to you’re more likely to actually go with what you thought was best instead of chugging along and digging yourself in to a hole. It also gives you the leeway to analyze why your income was lower which could help prevent it from happening in the future! We strongly recommend having a written plan, even if it’s not very long. For some reason the act of writing it makes it much more real. You’ll be able to refer back to it at a later time and see exactly what you agreed to do.
Closing Thoughts
You can really simplify life with unpredictable income if you focus on controlling what you can control and planning for situations you can’t control. Tracking your business and personal finances, living prudently, and planning for good and bad times will put you miles ahead of the person who does nothing. Don’t worry, this isn’t going to take you tons of time each and every day. You will have some upfront work for sure, but once you have your systems in place we’re talking maybe minutes a day in effort. That’s minutes a day that will buy you some piece of mind and probably save your ass once or twice when something goes badly.
As always, please leave us comments and questions. Want to get better at running your stream like a business? Sign up for our newsletter so you don’t miss a post!
