I work on a cruise ship for 18k a year. I rely heavily on commissions – how do I budget when my income is so unstable?

The key is to keep it simple. Start by looking at your average income for the last three months to give a realistic monthly income (post-tax). Next, tally your total monthly expenses. Work out what you have left after all expenses, giving you your disposable income. Your figures show that you should have some money remaining due to no major expenses such as mortgage, rent or bills. This provides a perfect opportunity to make the best use of the money you have left to build a better financial future that will make you feel more confident about your finances. 

Track spending

Keeping track of your expenses will give you control over your cash. Start by breaking down your spending into categories that make sense for you. For example, living expenses, transportation, subscriptions (like Spotify or Netflix), groceries, medical, debt payments, and entertainment. It helps to identify unexpected areas where your money may go missing. Create a spending plan to get a true picture of your money going out. You’d be surprised how much you can squeeze out of your income to make room for saving. Overall, tracking your spending helps identify areas for improvement so that you can spend less on things you don’t need and put that money towards something better. 

Start saving

It doesn’t matter how big or small your paycheck is. The earlier you start saving, the more money you’ll have in the future with fewer money worries. When you invest your money early, you don’t just earn interest; over time, you also earn interest on your interest, also known as compounding. The harder you make your money work, the more it will grow. The cost of living crisis in the UK has had a huge impact on the cost of our daily living, meaning prices increase while the value of your money decreases, and with your contract ending in 2023, it’s wise to set aside an emergency fund to cover unexpected expenses such as medical appointments, car problems, or even a loss of income. Ideally, you should set aside at least three to six months to give yourself financial peace of mind.

Create new spending habits

Managing money can feel like a mammoth task. That’s okay. There are tons of tools and apps available designed to make it easy to help get you sorted. Apps such as Emma, Plum, Monzo, or even a banking app (preferably where your current account is held) can be a great way to learn your spending habits. You’ll set a monthly budget and a spending goal for each category. Many apps have open data technology that links to your financial accounts to track your expenses. You’ll even get alerts when you exceed your category limit. Over time, this will help you become more confident in managing your money and keep your spending under control. 

Focus on long-term goals 

Your twenties are a perfect time to get your finances in order, and getting the right financial advice about your future is crucial. You can do a few things to action your long-term goal plan. Firstly get a grip on your finances through budgeting, create an emergency fund and set future goals. 

Some possible goals you may consider:

• Short-term goals: saving for a holiday or an emergency fund to ensure you can financially survive if your income stops or reduces for a while. 
• Medium-term goals: saving up for a car, house or major event. 
• Long-term goals: saving for retirement or paying off your mortgage.

If in doubt, speak to a financial professional to help create a future financial plan.