Income Buffer: A Homesteading Secret

There is an income buffer secret that really can make a huge difference when running a homestead. It is a very simple concept, but maybe hard for some people who are in the “live paycheck to paycheck” rut.

Income buffer secret

The secret is to arrange your budget so that you are only spending THIS month the income you brought in LAST month. What you have is a buffer that allows you to deal with fluctuations in your income stream – something that is typical of folks who rely on income from sales of homestead items and products.

Getting to this budget place may require forward planning. You may need to build your budget so each month over time you are putting aside some money until you have the month of income saved. Then you can start using that saved months worth of income to start the buffer process.

Another alternative is the use a tax return or some other payment to create your buffer.

If you are comfortable with spreadsheets this is something you can easily set up and follow using Excel or Numbers (Mac).   I even cover how to do this in the Managing your homestead money eBook.

Some computer programs/websites exist that can help you in the process.   They can cost you some money initially (like $60-$100), but can take out the heartache if you are not a “spreadsheet person”.  You Need A Budget is just one, but there will be others.

Using the income buffer

Once you have a buffer, you will find that you can plan around drops in income that occur in the month you are spending.

For example, say last month your homestead and other activities brought in $2000.   So this month you can adjust your budget to spend/save the $2000.   Then during this month you only bring in $1500.  Next month you can budget to spend/save the $1500…which means adjusting you budget down $500 from last months.  That might seem tough – but you know EXACTLY how much money you have to spend/save…and not guessing….and so you can make sound decisions on where to save that $500.

This puts YOU in control ahead of time.   The alternative is that you are guessing how much money you will bring in…and then when you don’t reach your target you are scrambling for ways to make up the shortfall…and the money is in charge of YOU!

Being in control is the key here – and an essential skill for a successful homestead.