By in Budget, Money Management, Saving | 15 comments

Decades ago I sold real estate. A hallmark of a straight commission sales job is the uneven pay schedule. Some months I’d have a huge payout. Other months I made zero. Actually, I liked this form of pay because I was compensated for my performance. If I didn’t sell, I didn’t earn. Like any other freelance type job, there are lots of times when you put in the effort and don’t see the payoff.

I had these clients with an incredible large home, and I was hoping to list the home and eventually reap a large commission. I stopped by with a detailed marketing plan and talked with them for several hours. They were uncertain whether to proceed or not and requested I stop by another time. After three visits, I realized these folks liked to hash over the “what ifs” and had no intention of selling.

Do you know how much money I made on that client? Nothing.

There were other clients I met one day and sold a home within the week. My per hour compensation for those types of clients was great.

In the end, it evened out. The harder I worked, the more income I made. The uncertainty was in the reality that I didn’t know which efforts would pay off and which wouldn’t. Over time, I became more astute at figuring out which clients were likely to buy and which ones were just wasting my time.

How to Even Out your Cash Flow

Freelance or commission work requires impeccable cash flow management. There is one way to guarantee that you can pay your bills. When embarking upon a job with an uncertain pay schedule, you must have a cash cushion of at least 3-6 months of living expenses saved up.

What if you don’t have a cash cushion and want to continue working free lance or on commission. There are two alternatives.

  1. Some commission jobs offer a draw against commission. This means the employer pays you a regular amount (draw). When you make a sale, you are obligated to pay back your draw. This works out nicely in terms of bill paying as long as you don’t draw more than you can reasonably repay.
  2. In the case of freelancing, you may want to hold another job as well with regular pay until you can build up your savings. Home Depot, retail, fast food, or other jobs don’t pay a tremendous wage, but have flexible hours and provide an interim cash cushion until you build your business and savings.
  3. Although, not the best alternative, a short term loan is sometimes needed to tide you over. Clearly, if your freelance or commission job does not have potential to pay the bills, you need to find work that is more secure.

Save a portion of every penny you earn and your life and work options improve.

Can’t Get Enough Cash Flow Management?

 We all have those months where income does not equal expenses; What are your tips for managing an uneven cash flow?



  1. Great post Barb. Boy can I relate to your experience in working with prospective clients who clearly are not serious about moving forward. This is a lesson that I’ve learned over the years. I had a few of these experiences early on. I am much better at screening out the perpetual tire kickers, though certainly not perfect. I want to spend my time helping clients who want the advice of a professional advisor, this is both more gratifying personally and of course helps pay the bills.

    Roger Wohlner

    June 23, 2012

  2. Thanks for the mention! I totally agree that you have to be a cash flow master if you want to have a uneven cash flow and not go into debt. Great pointers.


    June 23, 2012

  3. @Roger, Time is so precious, understanding who is wasting your time is really important (and not so easy to determine).

    Barbara Friedberg

    June 24, 2012

  4. Yeah, cash flow management is between science and an art form. I always miss out on the latter :).


    June 24, 2012

  5. Loans or lines of credit can help, but they can take a bite out of earnings. So, they’re the last option during the really slow times… The best strategy that I’ve found is making sure there is another stream of income (even if it’s a small one), and that a large portion of money is just put aside during those big pay-outs.

  6. @Marie-That is the perfect description. Monthly, yearly, and lifetime cash flow is definitely a tightrope between art and science.
    @Adam-Absolutely. Nothing beats a variety of income sources and a nice savings fund.


    June 24, 2012

  7. This is an invaluable post for anyone who has commission income. On point #1 the key is definitely not to borrow more than you can repay. If you’ve never had success managing debt before, it’s better to use one of your other suggestions.


    June 25, 2012

  8. Cash flow is one of the more difficult things that freelancers and small businesses must master. A cash cushion is vital, but it can be tough to build one and grow your business at the same time. Getting a second job or a side gig temporarily is a good idea.

    Mike Collins

    June 25, 2012

  9. The first year living on variable income is tough to figure out, especially if you’ve been used to a dependable paycheck every two weeks.

    I’d also suggest building up an additional stash of cash to help with cash flow beyond the emergency fund. This cash flow fund can help with the low months and can be paid back without endangering the emergency fund.

    How did you handle budgeting and cash flow planning when you sold houses?

    Brent Pittman

    June 25, 2012

  10. My income has been uneven for years. I’ve been really good at managing the “good” months and the “bad” ones (usually summer time) by putting away excess cash. However, trying to establish a long-term savings account can be tricky. I’m working on it though!

    Little House

    June 25, 2012

  11. This is a problem I don’t see a lot of people talking about. I certainly see it a ton among contractors and anyone involved in real estate. I also see the same problem among teachers that stop receiving a paycheck during the summer months. Budgets are a necessity for these workers.

    a blinkin

    June 25, 2012

  12. @Average-I know it’s tedious to say, but in general, until you have 6-12 months cash built up, it’s really important to live financially conservatively!
    @Mike-Thanks for bringing up the idea of building up additional cash flow. A steady part time job can certainly help.
    @Brent-I’ve always lived very conservatively and saved aggressively! By now, this type of lifestyle is a habit.
    @Little house- Practice is the key. The more you get in the habit of living on less, the easier it is.
    @blinkin-Thanks for bringing up the idea of a budget, that’s really important!!!


    June 25, 2012

  13. Hi Barb, I agree, sometimes what we forget is the fact that we should always live within or even below our means to ensure that we have some money left in the bank in times of emergencies.

    John Exami

    June 27, 2012

  14. Hi Barb,
    Those are some great points about freelance and/or commission work. It is vital to make sure that you manage your finances well. Otherwise, you may struggle during a “down” month, especially as you are getting established (both in your finances and your reputation/credentials).

    BTW, I didn’t get a ping, so I just happened to stop buy today. Thank you so much for the link. Cheers!

    Roshawn @ Watson Inc

    July 1, 2012

  15. @John, I couldn’t agree more. That is a true secret to financial success.
    @Roshawn, The up months are great, as you mentioned, you gotta be ready for the slow times. I don’t get many pings either, I need to check this out.


    July 2, 2012


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