How an Irregular Income can Affect Your Finances Badly?

With the changing socio-economic situation, increasing globalization and turbulent political scenario, the nature of employment and jobs have undergone a sea change.

  • Two decades ago, you could have held a stable job, irrespective of it being in the public or private domain. This, in turn, would have entitled you to annual appraisals, periodic promotions and a retirement corpus. But the change in the nature of jobs, which includes a sharp decline in the number of permanent government jobs, means that market dynamics can negatively impact your job prospects. You can receive a ‘Pink Slip’ because of several factors, including the recession and economic slowdown. The private and government sector now primarily comprises jobs, which are contractual.
  • Besides, you can be an entrepreneur, a freelancer, or a self-employed person with an unconventional job. Because of these reasons your income can become unpredictable and irregular. This, in turn, is bound to affect your finances badly.

How Irregular Income Curtails Your Financial Freedom?

An irregular income can affect your finances in the following ways:

  • Inability to make an investment plan: Whether you are planning to build a corpus for your future financial goals, or trying to secure funds for retirement planning, your investment plan remains the blueprint. An irregular income can become a huge impediment in drawing a viable investment plan.
  • Inability to continue regular investments: Even simple plans like Systematic Investment Plans (SIPs) and Recurring Deposits (RDs) are an integral part of your investment plan. But, an irregular income means that you will be unable to contribute regularly towards these plans.
  • Inability to make long term investments: With an irregular income, you will not be able to make long-term investments, which offers the highest returns. As you are uncertain of the future, you can be forced to take a quick-fix, or short term investment options, which will again derail your finances.

Thus, irregular income will force you to push back your investment. Even when you have a surplus income, you can find an excuse not to invest, or probably to invest only a small amount. You must, however, remember that an irregular income should not be an impediment towards securing a better financial future. According to market experts, despite having an irregular income, you can still invest for the long term. Read on to find how:

  • Make a contingency fund for six months: Once you start receiving an income, your foremost priority should be to create a contingency fund. You must, ideally, keep a contingency fund for six months to help you in the case of an emergency. You must ensure that this fund is able to meet your monthly expenses for the next six months, in case you suddenly stop receiving any income. This fund will help you to plan your finances in a better way.
  • Demarcate your savings and expenses account: You should separate your savings and expenses account. You must consider opening a separate account only for savings and investments. The other account, where you receive your income, can be used to pay your bills, and manage the monthly expenses. This will go a long way in securing your financial freedom.
  • Save each month no matter what: Once you have opened a separate savings account, you must endeavour to contribute a specific amount here each month. You should zero in on an amount that you find comfortable and save each month, irrespective of your income. A part of the funds in your savings account can be used to invest in simple investment instruments like SIPs or RDs. Alternatively; you can accumulate a large capital, and then invest in long term market instruments.
  • Save surplus income too: There could be a possible scenario when you receive more income than expected. Instead of splurging the sudden gain, you must save a part of this in your savings account. This will further increase your savings, and help plan for long term investments.
  • Get a Public Provident Fund (PPF) account: You can consider having a PPF account as it is among the most flexible investment instruments in the market. You are allowed to contribute anything between a minimum of Rs 500 to a maximum of Rs 1 lakh in a given financial year. Not only does it save tax, but also helps you build a retirement corpus.
  • Cut down expenses: This is the most fundamental advice for better finances. You must cut down unnecessary expenditure, and save more.


Thus, an irregular income might seem like a huge barrier to long term investments and a better financial future. But with prudent planning you can still fulfil your financial goals. If you want to plan for long term investments, consider investing in stocks and securities with a trusted financial partner. You can easily open a free online Demat Account along with a Trading Account. Here, you should look for features like zero Demat Account and Trading Account opening charges, along with a specified free AMC period for the Demat Account. A trusted financial partner will provide you with an all-in-one trading platform through your online Demat Account.

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