The only things certain in life are death, taxes, and…fluctuations in the stock market. It inevitably experiences highs and lows, surges and dips. As a financial advisor, and someone who follows the market quite closely, not much surprises (or worries) me anymore. I’ve made peace with the market’s unavoidable swings.

But what about someone who relies on their investments for a large portion of their income? What if you’re retired and are counting on the money you tucked away in the stock market to get by?

With the market slowing down into “bear” territory and constant speculation about a recession, things seem uncertain and, for some, downright frightening. If your investments aren’t earning as much as they were, will you be okay?

You might compare fluctuations in investment earnings to having a variable income. One month, you could make a solid 4 percent return on your investments, and the next month you might make ¼ of a percent (or even lose money). Similarly, if you work as a contractor, consultant, coach, or advisor, you might pull in quite a bit of money one month, and have very little work the next.

That may sound nerve wracking, but if you’re properly prepared, a few lean months shouldn’t make a difference. Just as a consultant might build up an emergency savings fund for slow months, so too should investors take preventative “just in case” measures.

Despite all the ups and downs of the stock market over the past several years, my clients have not been overly concerned. They are well prepared to take on whatever is thrown at them.

Though investment strategy can get complex, here are a few basic steps you can take:

1. Develop a Plan

The bulk of smart investing involves not-so-glamorous data collecting and calculations. What do you typically spend in a month? Will that change once you’re retired? What large expenses do you anticipate in the future? Medical expenses? Kids in college?

Developing a comprehensive financial plan often involves a lot of digging, compiling data, and putting together a plan that reflects your current reality, your anticipated reality, and will build in some wiggle room in case things don’t go as planned. It’s possible to put this plan together yourself, but it’s much easier (and safer) to work with a trusted financial advisor.

And after you develop your plan, stick to it (unless your financial advisor recommends otherwise).

2. Don’t Put All Your Eggs in One Basket

If you diversify, you’ll be in a much better position to weather any market “storms.” Instead of putting all your money in the stock market, for instance, it’s a good idea to make other investments and to set aside some money in an emergency savings account. Common wisdom says that we should tuck away enough money to cover three months of normal spending. I tend to push for six months, just in case.

3. Don’t Panic

Some of the worst investing decisions are made when people are in panic mode. They pull their money when they should leave it be, they make risky investments, they ignore logic in favor of sensationalism. Experienced freelancers are accustomed to financial fluctuations and learn to go with the flow (and tap into their emergency account if they need to). This patience and big-picture-thinking is a great lesson for anyone to learn.

4. Trust the Experts

Those with a variable income either learn how to manage their money the hard way (through trial and error) or by consulting experts. Many blog posts, articles, online videos, and tutorials exist that can help freelancers or consultants learn how to manage their variable incomes. Or, they can enlist the help of a financial coach or simply ask another experienced freelancer for advice.

When it comes to investing, numerous resources exist to help you along. The trouble is, there is so much advice out there, it’s sometimes difficult to know what (or who) to trust. That’s where financial advisors come into play. When in doubt, seek out a licensed professional with years of experience and a proven track record. That’s a much better route than combing the internet for advice.

 

Variable income is nothing new for freelancers and consultants, and it shouldn’t be a big deal for smart investors as well. With some planning, diversification, and a level head, you should be able to ride the ups and downs of the stock market without issue. And when in doubt, turn to a trusted financial advisor for guidance.

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