There is usually a base level below which your income doesn't usually fall. That is the income level you should plan with.
Regardless of what your income is, where you are living or who you are living with, there is a basic level of spending that covers the essentials of life. These are the expenses to start planning with.
It is best to underestimate income and overestimate spending in order to err on the side of caution.
You may also have uncertainty around future plans for a sum of money you have on hand.
Perhaps you are thinking of using the funds to renovate the house or set up a business.
Think of the minimum time period in which your level of certainty will increase and invest for that time frame to get a better return. As the uncertainty diminishes, plans can be adjusted accordingly.
- Liz Koh is an authorised financial adviser. The advice given is general and does not constitute specific advice. A disclosure statement is free. Call 0800 273 847. For free e-books, see moneymax.co.nz and moneymaxcoach.com.