1. An earner from an irregular income needs to review her budget and see how she has been dealing with her income and expenses.
2. Falling behind on saving and investment targets consistently would indicate that her estimate of income and expenses may have been inaccurate.
3. Where income is likely to be uncertain, it is better to have a conservative idea of the income till it becomes more stable.
4. Working with a lower level of income will help her to keep a tighter rein on her expenses and increase her chances of reaching the saving targets.
5. She may be underestimating her expenses and not correctly considering the increasing cost of various expenses over time, as some expenses, such as food and travel, will change frequently, while others on housing, education and medical needs may vary less frequently even though the quantum of change will be higher.
6. She will have to make these estimations correctly to be able to get a good idea of how much she can spend and save from her irregular income by observing her expenses over a specific period to get an idea of how much she is likely to spend.
7. She must also review her budget every time there is a change in her personal situation, which will have a significant impact on the nature and level of expenses.
8. As a next step, she must review the impact of the change on her goals and their achievement, and take corrective action, if required.
9. This will ensure that her financial plan reflects her current realistic situation so that she does not make the mistake of using her long-term savings, say a retirement corpus, for short-term expenses, to avoid losing out on the benefit of compounding of return on her investments.
10. A back-of-the-envelope calculation shows that an investment of just Rs.1,000 weekly Systematic Investment Plan (SIP) in a Balanced mutual fund, by a 30-year young earner, out of her net surplus saving, during her 30 years of earning life, will give her a Rs.22,000 weekly Systematic Withdrawal Plan (SWP) from it for the next 30 years of her retired life.
2. Falling behind on saving and investment targets consistently would indicate that her estimate of income and expenses may have been inaccurate.
3. Where income is likely to be uncertain, it is better to have a conservative idea of the income till it becomes more stable.
4. Working with a lower level of income will help her to keep a tighter rein on her expenses and increase her chances of reaching the saving targets.
5. She may be underestimating her expenses and not correctly considering the increasing cost of various expenses over time, as some expenses, such as food and travel, will change frequently, while others on housing, education and medical needs may vary less frequently even though the quantum of change will be higher.
6. She will have to make these estimations correctly to be able to get a good idea of how much she can spend and save from her irregular income by observing her expenses over a specific period to get an idea of how much she is likely to spend.
7. She must also review her budget every time there is a change in her personal situation, which will have a significant impact on the nature and level of expenses.
8. As a next step, she must review the impact of the change on her goals and their achievement, and take corrective action, if required.
9. This will ensure that her financial plan reflects her current realistic situation so that she does not make the mistake of using her long-term savings, say a retirement corpus, for short-term expenses, to avoid losing out on the benefit of compounding of return on her investments.
10. A back-of-the-envelope calculation shows that an investment of just Rs.1,000 weekly Systematic Investment Plan (SIP) in a Balanced mutual fund, by a 30-year young earner, out of her net surplus saving, during her 30 years of earning life, will give her a Rs.22,000 weekly Systematic Withdrawal Plan (SWP) from it for the next 30 years of her retired life.