Category : Work Online From Home
In the economy at large, we go through periods of expansion and contraction. This is a known and natural part of Economics 101. Few like it when the economy contracts and turns down, we all have to live in the cycle of boom-and-bust. We would love to have an economy that grew at the same rate, year in and year out, yet that is not reality. Our economic system is vast and dynamic, with many moving pieces that lead the to the boom-and-bust cycles that occur. Yet when we look over time we can see an overall economic expansion.
So if we apply this same concept to our personal finances, what do we make of it? Through meeting with a number of different professions, I have discovered that people within their own family have boom-and-bust cycles of their own. These cycles do not necessarily correlate with the broader macro-economic patterns, but they seem to have a similar psychological effect—perhaps an even more profound impact because the individual experiences it personally.
For the point of this blog let’s assume that people earn money in one of two ways. 1) Regular Basis (same amount): typically these are hourly employees and salaried non-bonus employees. 2) Variable Income: where much of their income is tied directly to what they produce. They can be entrepreneurs, sales professionals, contract based employees. These folks do not get a regular paycheck every two weeks or once a month. Rather they get paid based on a contracted basis.
So what does this do for families that receive variable incomes? They live with a higher degree of variability in their earnings. That level of uncertainty creates practical challenges like managing cash flow to pay bills, and also psychological challenges as their income and ability to pay bills are directly contingent on producing.
As you look at your own family economics
1. How does income flow through your home now, does it come in a steady stream, mild waves up and down, or in big waves with potentially big breaks in between?
2. How did the family you grew up in earn their living—was it a steady paycheck or uneven cash flow?
3. What was the perceived ability of your family to create, sustain, maintain, or grow financial security?
4. What was the variance in your families’ income?
5. Where there big swings week-to-week, month-to-month, year-to-year?
6. Did your families’ income remain relatively flat, grow as you grew, or decline?
7. Where there interruptions to income producing ability—perhaps a significant career shift, disability or death?
8. What emotions come to you as you reflect on these questions?