Managing Money on a Variable Income

Budgeting for bill payments and saving can be a straightforward process when you have a regular, consistent paycheque. But how do you stay on top of your finances when your income differs from one month to the next? What if you’re just not someone who can follow traditional financial planning? Enter Chris Enns. Chris is an opera-singer and a fee-only financial planner specializing in helping people who work in creative careers organize their sporadic salaries. He understands first-hand the struggles of applying traditional financial advice to a non-traditional cash-flow. Today Chris outlines his approach for managing cash-flow when you have variable or intermittent income.

Chris explains that many people in the creative world avoid thinking about money because they believe they are just bad at it; they just don’t get it so they think managing their finances is something they can’t do. As ‘money misfits’ they don’t feel they are part of the financial conversation. The terminology around money is foreign so they don’t connect with the language.

I think this lack of understanding the words around finance probably applies to most people and goes a long way to explaining why personal finance is so hard for many Canadians. But for someone working in the gig economy, the practical challenges of managing their money are doubly hard. They often work multiple jobs and have multiple income streams. Or, their work is seasonal, and so they have to stretch their dollars over the months that they don’t work. Using a traditional approach to budgeting and spreadsheets just doesn’t work. You can’t just take last years income and divide by 12 for a monthly budget when you worked one project last year and may have a different project, movie or contract next year and maybe a big gap in between.

Budgeting on a variable income

If you are self-employed, work in the gig economy or work on commission, you can’t accurately predict what income will be coming in each month. That means starting with your personal expenses, something you do know. You know how much your rent will be, your food and other personal costs. Add all this up and figure out how much ‘income’ you need each month to cover these costs.

Next, build a cash flow system that involves paying yourself a salary, regardless of what your business or project income looks like. Since you don’t have a regular salary, you have to create one for yourself.

Take the 25, 25, 50 approach. 

If you’re not sure how to start organizing your cash-flow, Chris recommends a strategy of allocating all your cash inflows into 3 different buckets:

  1. 25% to cover your potential tax liability,
  2. 25% for your business costs,
  3. 50% towards your personal and living expenses like rent, groceries, gas, and other bills.

Obviously these percentages can be adjusted based on your personal situation. If you have higher business costs to earn your living (like flights costs and purchased services like Chris does) then you might need to put away more to cover business expenses.  If your personal expenses are higher, you’ll have to allocate more there.

Chris even suggests opening a different bank account for each of these groups. That’s the concept of paying yourself a salary. You put money aside for taxes & business costs, the rest goes to you to cover your living expenses.

What about debt repayment?

If you do have debts you need to repay, Chris recommends that your first step is to stabilize your cash flow using a system like the one above. You need to find out why your debts keep growing so you can take steps to stop debts from growing even more. Chris suggests it’s OK to keep paying the minimum on your debts until you get your cash flow in balance and then you can start planning on paying off more of the balances each month.  It’s better than living on the borrow-repay-borrow cycle that doesn’t address the underlying problem which the need to restructure your life (and money) so debt doesn’t keep coming back.

Read More: Self Employed: Dealing with Business Debts

For more details on how to handle variable income and to hear Chris’s story, tune in to the podcast or read the complete transcript below. 

Additional Resources

FULL TRANSCRIPT – Show 237 Managing Money on a Variable Income

managing money on a variable income

Doug:                Before I have a guest on the show I arrange an introductory phone call with them so I can explain what the show’s about so we can pick a topic to discuss. So I did that and today’s guest said he would be out of town so it would be easier for him to phone me so I said fine and he called me and I asked where he was calling from and he said Paris. And I said oh that’s cool I live close to there, I’ve got an office in Brantford, it’s only a few minutes away. And he said no, Paris France. And I said what are you doing there? And he said he was working. And I said but I thought you were a financial guy. And he said yeah but I’m also an opera singer.

                          So today for the first time ever we’re going to talk money with an opera singer who I am pleased to report jumped on a plane and is now sitting in my office here in downtown Toronto. So let’s get started. Who are you and other than being an opera singer, what do you do?

Chris:                Other than being an opera singer I’m Chris Enns and yeah, I’m an opera singer and I split my time kind of between the opera stage and financial planning. So advice only financial planning, specifically for people like me, for creatives for people that are kind of outside the norm a little bit, whose finances or way they think about money may seem a little bit different but I’m Canadian, I grew up in Manitoba on a farm. So farm boy opera singer, financial guy, classic track.

Doug:                That’s right, I’ve never had that exact person on this show.

Chris:                It’s strange you haven’t found somebody, we’re everywhere.

Doug:                So this is cool and I was going to get Chris to sing the theme song in opera but we don’t actually have a theme song so next episode that’s what we’re going to do.

Chris:                I’ll work on it, yeah.

Doug:                So tell us the story then because I don’t have a lot of farming, opera singing financial guys. I know you’ve got your level one certification in financial planning from FPSC, which of course is the financial planning standards council and you’re working towards your designation as a certified financial planner. We’ve had a number of CFPs on the show in the past, you know, Sandy Martin and others. But obviously you’re also working as an opera singer. So tell me the story, how did these two things come together?

Chris:                So opera singing is my background and I started taking school, going to school for opera singing oh yikes, never count the years, right? It always feels – want to say 10 years but I know I’ve been in Toronto for 10 years and I was studying before that so that’s not the answer but so for a long time.

                          So I did my undergrad and my masters work in opera and was nothing to do with money. I hated, I didn’t even hate thinking about money I just didn’t. Like many people in the creative sphere I avoided thinking about money as much as possible and so I only started thinking about money when I started making mistakes. And, you know, some of them you could kind of sweep under the rug for awhile but eventually the mistakes pile up.

Doug:                They come back and get you.

Chris:                They really do. And so they kind of got to a point where I really had to look at the monster under the bed and actually face those things. And the big surprise for me was that these basics – because so many of the words, especially for artistic people oh, you’re just not good at money or money’s just – you just don’t think that way. And you get really used to this idea not only will you never have money but you’re just not responsible for thinking about the financial side because it’s just not for you. It’s not something that you need to worry, not need worry about but your brain isn’t – it doesn’t work that way.

                          And I found when I started facing it, it was the exact opposite, that learning the basics was really empowering and getting a sense of my basic cash flow and starting to pay off my tax debt that was the thing that kind of broke the camel’s back, was really something I could do and something that I could take over this thing that was really scary for me and make it something that was in my control and that I could actually, you know, drive the boat.

Doug:                Well and that’s why I wanted to have you on the show because I think you’re an example someone who’s, you know, I guess the word today is the gig economy. So you don’t have a standard 9-5 job at a big corporation that you’re going to be there for the next 30 years. You’re not going to get benefits and a pension and all the rest of it. So you’re in Paris for a couple of months, you’re back here, you’re going back out on the road, whatever.

                          So I mean there’s obviously a lot of specific challenges you face in that environment. You mentioned taxes, that’s an obvious one. So what are the challenges that someone who, like both in the gig economy but also someone who is I mean a creative because I guess there’s different sides of our brains, right?

Chris:                There’s at least two of them that they tell us about.

Doug:                Right so I guess the I love spreadsheet side is different than the artistic I’m good at music and art and that sort of side. So what specific challenges do you see in your world either on the creative side or the gig economy unstable employment, sporadic employment side when it comes to money?

Chris:                So there’s a couple of things. On the practical side I think that anyone who has multiple employment streams or works in the gig economy or balances a couple of careers, has unpredictable income streams, and that can come in a whole bunch of different faces. Income streams, it’s interesting because you put it under one big umbrella like variable income but variable income can look so different for different businesses.

Doug:                That’s why they call it variable.

Chris:                Exactly but, you know, you can’t – I can’t explain opera. We often book two years in advance or a year in advance so that’s different than working with clients my other side where you’re bringing people in and the cash flow looks totally different. And so you put it under one spectrum but that’s really practical, the idea of dealing with taxes, the idea of running, you know, a small business, even if you’re not aware you’re running a small business, so business inflows and managing that and separating that out from your personal inflows and just kind of the alchemy of that. But I think those are the practical kind of things that we all have to deal with. On the creative side, and for lots of, you know, I deem the word sometimes money misfits,

Doug:                Money misfits.

Chris:                It’s kind of a bigger umbrella for people just don’t feel like they’ve been part of the financial conversation. And I think that one of the biggest issues that they face is the communication’s problem. They don’t connect to the language that – the language of money and the way we talk about money in the financial sphere or just generally they don’t connect to that, they don’t connect to the acronyms, they don’t connect to the spreadsheets. But they don’t necessarily also connect to some of the underlying words like wealth and, you know, the idea that oh, I need to get as much money as possible. Lots of creative people just don’t think about their finances that way.

                          So if you’re always framing things through the accumulation of wealth, as we often do in the financial sphere, that’s going to say well, that’s not for me. If that’s what that is, investing in different things and making as much money as possible, I’ve made different decisions in my life. But it’s not, money is just a tool that we use to build the lives we want and so the communication issue is a big part of it.

Doug:                And why is that? I understand you speak English, I speak French, we’re talking a different language, you’re opera, I’m rock and roll kind of thing. I get that. Is that what is it, we’re just using different words or is it something deeper than that?

Chris:                I think that your opera rock and roll thing is a metaphor that I really like. You know, in the arts we’re telling the same stories.

Doug:                And I look like a rock and roll guy don’t I? Come on, there’s nobody more rock and roll than me, that’s absolutely right? So what is it then?

Chris:                It’s – I think that’s one of the interesting problems to solve. And I don’t think we’re trying to solve it in the financial sphere enough. I think that too often we say the same words over and over and then say if you don’t understand this you have to change or, and people hear this whether it’s being said or not, and it is being said sometimes, you’re dumb if you don’t understand this. You’re bad at money if you don’t understand this.

Doug:                So is there an example of a word that is – I mean I know in my world I never use the word creditor when I’m talking to people. Because if I ask someone on the street what’s the difference between a creditor and a debtor, it’s like I don’t know. Okay, well a creditor is someone you owe money to, the debtor is the guy who owes the money. But I never use those words I just say tell me about the people you owe money to, which is better than saying the word creditor. So it’s making it yeah in simple easy to understand language. Is that what you’re talking about or is it something more than that?

Chris:                Not only that. I think that’s part of it. I think it’s also just about trying to – what I tell people a lot is that in order to be good at your money you don’t have to change everything about who you are. Especially I talk to people who are incredible at their crafts, you know, they’re dancers, they’re writers, they’re singers. They’re incredible at something; they know how to develop a technique to be great at something.

                          What they don’t know is how to develop a financial technique. And so what I talk to them about is saying okay, especially I love working with singers because I understand that technique so well. I can express in that words being this is what you do here, it’s the same in money, this is what you do here, it’s the same in money. And when I’m talking to, especially for story tellers, which is a big umbrella of all kinds of people who are communicators and trying to communicate things and trying to say okay, what’s the most important thing? It’s not the words and the grammar, it’s knowing what story you’re telling and to making sure when I’m talking to clients always working first from a point of what are you trying to do, what is your money for?

                          Before trying to solve debt problems, before trying to figure out retirement, we’re spending a lot of time talking about intention and this is something we do in the financial industry all the time, I’m not making – this is not revolutionary idea from Chris. But making sure that people are grounding that sense in themselves and relating saying okay, this is just like your technique, this is just like something you do well already and this is how we’re going do it and then we’ll add a spreadsheet, versus starting with the stuff that they’re not good at and getting overwhelmed by that. We add the acronyms to what you want, we add finance to the personal, not the personal to the finance. And I think that’s what kind of I’m talking about.

Doug:                Yeah, you’re not trying to fit a square peg into a round hole I guess. So your website it’s called ragstoreasonable.com and I’ll put a link to that in the show notes and like you just said you help creatives and as you said money misfits, so what – how do you define a money misfit then, what does that word mean to you?

Chris:                I think it is around this miscommunication. It’s just people that feel left out of that financial conversation for whatever reason, whether it’s they Googled how to make a budget and the first line was take your income and divide it by and they go I don’t know how much income I’m going to make. So whether it’s that or I remember the first time I went into a bank and I wanted to invest in my TFSA, I was feeling really confident, I was starting to get control of my money.

                          And the woman across the desk wanted me to invest my tax fund, the money that I had set aside for taxes for the year. And she was like oh, just no but you’ve got $6,000 here and you can put that in your TFSA as well and I was like I don’t think – I didn’t have the confidence yet and I was like I don’t think that’s what I should be doing. It’s not, I’m not saying it as a fault, although I do think the financial industry should try harder to find new ways to communicate with whoever’s in front of them, but they just have not necessarily clicked with what’s being put out there.

                          So trying to create a space for the people on the outside that aren’t engaged in the general financial conversation, they’re not asking the questions that everybody else is asking and they’re not – they don’t have a place to go for support. And so trying to create a place for people like that to come and start a conversation.

Doug:                So you’re saying that banks and maybe traditional financial planners start with the tool well this is a TFSA, this is a budget and we try to ram it down your throats rather than the other way around. And I guess this is the difference you see dealing with, you know, creatives or money misfits, is start with the person, what language do you speak, what you understand and then work from there. So really what you’re saying is, you didn’t use this, you didn’t use this word but you’ve got to start with the goal, the plan, something like that is that really what you’re saying?

Chris:                I think that’s a big part of it. I think that’s such a great – this is what I found in the advice only financial planning world, is that’s the kind of financial planning that a lot of people are doing for a lot of different voices. And so, you know, people are doing it for engineers and doctors. And, you know, I like working with engineers and doctors, I don’t speak their language as well. I always have a hard time working with engineers because I’m more likely to talk about how do you feel about this and how are you connecting to this? I’m more of a feelings, emotions guy, I care about that and they want to make sure that decimal is in the right place and I don’t care about the third decimal place. So there’s places where I don’t speak the right language either. I think that so much of the financial industry is product driven, right?

Doug:                That’s where they make all their money.

Chris:                And so that’s a big problem.

Doug:                So what types of careers do you see that you’re helping people? Obviously you probably have a few opera singer clients but what are some of the other, you know, non-traditional careers, non-traditional job paths that you’re helping people with?

Chris:                Lots of actors. I’ve been involved with a partnership with ACTRA Toronto for the last year and so there’s been lots of actors and people in the film industry because it’s not just the acting side, the tech side, anybody who’s connected to that, the stunt side, that whole world. I work with some fitness professionals who have, you know, not necessarily that creative sphere but their income is more client based. I work with some more self-employed client based people that run, you know, online business, kind of the connections that – but it’s amazing how putting that title money misfit opened up to a lot more people, writers, dancers.

Doug:                Yeah and there are so many more people who don’t have a traditional job.

Chris:                What is a traditional job?

Doug:                What is a traditional job, yeah that’s a very good question. They are few and far between. The number of people out there in the world who have – are going to be at the same job for 30 years, are going to move through the ranks and have a pension when they are done, is okay I don’t know 5% of the economy, maybe if you’ve got a government job or something and that would be about it.

                          So, what then is the approach for somebody who has either multiple streams of income or more likely many different streams of income, so all those people you just talked about, you know, anybody in the entertainment business? You’re right in this office, we’re at Yonge and King and for people who are just watching we’re using a different room than we’ve used before, just trying that out. But here at Yonge and King we get a lot of you just described. I didn’t realize how many different layers there were to the entertainment word. Because yeah, we all see the actors but they’re a small percentage of all the people, the technical people and writing and all the rest of it.

                          So what is your advice for people in that world who I’m going to be working on a project for two months and then I’m going to be off for two months and then I’ve got another one and back and forth, back and forth. You can’t do traditional budgeting where every two weeks you do this, so what kind of big picture advice do you give people for very sporadic or untraditional sources of income?

Chris:                Yeah, it’s harder. The truth is it’s harder

Doug:                And maybe that is the simple answer it is harder.

Chris:                I think it is. It seems unhelpful but at the same time it is helpful for a lot of people to know that they’re not missing something. You’re not bad at your money. This is something I tell to lots of people. You know why this feels hard, because it is hard. And because there’s a lot of language around finances, which is just make a budget, just sit down and make a budget like it’s a really easy thing. And it’s not easy when you have normal income either. It’s a difficult process that people white wash over far too quickly.

                          But when you’re income is variable it’s even harder. I think for me what I always start working with the clients here not only making sure you’re really set in what you want but the second big question we deal with is not income, it’s expenses. It’s the better you can know your expenses, you know you can understand your income side. You can’t start budgeting when your variable income from an income perspective. I know that the conventional advice often for self employed people is take your last two years and divide that by 12 and use that as a starting number, if your business works that way and is pretty consistent, great. If you work in the film industry maybe you were on a big show last year but you don’t have any potential work this year, don’t do that unless you have a reason to do that. Start from a place of what do you need?

Doug:                So I look at my expenses and I see well my rent and my groceries and it cost $2,000 to live and then what do I then do with that information?

Chris:                For sure. So what I work with people one of the biggest things I work with people is coming up with a cash flow system so that involves building a system so that you’re paying yourself a salary. So it’s basically you’ve got an extra step, you don’t get a regular salary you make a system so you’re paying yourself a regular salary. There’s no just in the sentence because it takes some time but the biggest piece of that puzzle is what do you need to pay yourself to make that work?

                          A lot of the work we do there too is separating out business and personal expenses so you can start seeing lots of sole proprietors don’t see any separation between who they are personally and who they are as their business and start putting those in two different piles. So you can start to make a structure so that when money comes in, whether it’s a big month or a low month you can start smooth that out so you’re getting the same amount that hits your personal account every month.

Doug:                So let me see if I understand what you’re saying here then. So I’ve decided to go into acting, I’m going to give up this whole accounting thing.

Chris:                I think you’re a natural.

Doug:                Oh yeah, I’d be great at it. And singing too, you all want to hear me sing that’s for sure. And so I get a job working on that big show at the Ed Mirvish Theatre, whatever that show is and I’m going to be on it for three months, okay? And so I’m going to make I don’t know how much you make on the show but I’m going to make good money. And then for a couple of months after that I’ll, you know, I’ll take a break I guess and then get the next whatever.

                          So I know that it’s going to cost me a couple of grand a month  to live because I’m an actor now so I’m bunking with four other actors and keeping my cost down and all the rest of it. So I assume what I need to do is take the $6,000 a month I’m making and put it into an account because each $6,000 I make I know buys me three months of runway.

Chris:                It does and it doesn’t right because we don’t – we’re making gross instead of net. So we’ve got another layer. So when $6,000 comes in, this is what I’ll set up with my clients, $6,000 comes ins and we’re breaking it up into three pieces. We’re putting 25% away into a tax account, we’re putting 25% away into a business account because you need to spend a certain amount to spend of every dollar to make the next dollar. And then we’re putting 50% into your personal account.

Doug:                So as an actor what expenses am I going to have?

Chris:                This is one of the most frustrating things, especially as an opera singer I’ll speak to being an opera singer.

Doug:                Let’s say I’m going to go into opera.

Chris:                Just because I know the expenses really well and because it’s a really high input business. When I want to do an audition as an opera singer, nine times, I shouldn’t say nine times out of 10, often it’s in New York I have to fly myself down there, I have to put myself up, I need to hire a pianist to play for me for that audition. So I can be putting out between 500 and $800 to do an audition that 100 other people are going to.

Doug:                So I fly to New York and how long is the audition like 10 minutes, 15 minutes, an hour.

Chris:                If they like you, five minutes if they don’t.

Doug:                So I phone around, find someone to play the piano for me, I guess I probably have to learn the music.

Chris:                Yeah, all that prep work you don’t get paid for.

Doug:                Yeah, unless it’s some opera I’ve done 15 times. And I’ve never done an opera so I probably have to learn it.

Chris:                You probably have to train a little bit.

Doug:                So I may – yeah, I may go on, well I will go on many auditions.

Chris:                Voice lessons because you need to get ready, you need to work with a language coach as well opera is not in English, or some opera is in English, most of opera is in Italian, French, Germany, Russian, Spanish. You need to learn that, you need to get that work, you need to be going to school, you need to be networking with people, you need to be going on a ton of auditions that you don’t get because this is just the same as networking in business. You don’t get the first job that you go for.

Doug:                Yeah, any sales person has to make many pitches to get one sale.

Chris:                Exactly.

Doug:                And so when you’re singing in French or Italian opera, do you actually understand what you’re saying?

Chris:                You have to understand what you’re saying at a certain level. So what they teach us to do is even if you’re not fluent they teach you how to cheat. So we take diction courses and we break down the language into the international phonetic alphabet so that you can learn the sounds. And then you translate every word and you know, even if you don’t speak French or you don’t speak German, you know this German and you know what you’re expressing.

                          You know, if you want the kind of analogy I make with my clients all the time this is exactly like finances you don’t need to figure out the whole language, you need to figure out the sentence that you know how to speak. So it’s like this is the language in front of you, you don’t need to know every acronym, you don’t need to know every investing strategy, you need to understand your investing strategy, you need to understand the RSP that you have. That’s all. You need to understand why you’re doing that. That makes you good at money.

Doug:                Got you. Now you hit on a key area, which was taxes. And so what you said was so I’m making $6,000 at this show I’m doing and it only costs me $2,000 to live but I didn’t really make $6,000 because at the end of the year when I file my taxes I’m going to owe money. So your strategy for dealing with that is –

Chris:                Right off the top right away.

Doug:                Literally have a separate account and that’s where I dump it into.

Chris:                Often in a separate bank.

Doug:                So it’s totally out – so I can’t touch it. Would you ever recommend to a client just send the money to Revenue Canada?

Chris:                Some people do, yeah.

Doug:                So in effect you’re making instalments.

Chris:                Some people do, some people – I’ve had clients just kind of sending it straight there all the time. It depends on the personality, some people if they see that money in their account they’re going to raid it so you put it in a separate account. Some people don’t want to – you know, I think the majority of people want to spend as little time thinking about their money as possible.

Doug:                Yeah and I don’t want to be giving Revenue Canada money early and if I work six months and then I don’t work six months maybe I don’t owe as much in taxes.

Chris:                This is why I don’t get along with the engineers because in my mind I say I don’t really care about giving money early to the tax debt if it’s going to mean you don’t have tax debt come tax time. I think that that cost, I think it’s something that you need know about but I think that that can be worth it. I don’t have a lot of stress about that.

Doug:                I totally agree and anybody who’s self employed, and I’m much more likely to be working with people who are in the construction industry for example, so very busy in the summer, not so busy in the winter. And I say to them look you know that over the course you’re going to make this much, that puts you in this tax bracket so every dollar you make, that’s how much you’re going to have to give to the government.

                          So why not every pay you get during the summer if you’re self employed and it’s not being withheld, just send it right to the government. And then it’s gone and if you overpay they’ll give it back to you. And yes, I understand if you put it in your own TFSA you could earn interest on it at .5% and, you know, you’d have an extra 50 bucks at the end of the year but this way nothing can go wrong. So I’m a big believer about that.

                          Okay, so let’s think this through here. I mean obviously I’m a chartered accountant, a CPA, which is the most traditional kind of job there is. Since graduating from university, I was thinking about this the other day, which was like 32 years ago, of course I was a child prodigy, graduated at the age of 7, I’ve had exactly three jobs, three jobs. I was at KPMG for 10 years, big accounting firm, then I spent less than two years at PWC and I said forget this and then started Hoyes Michalos, which was about 20 years ago.

                          I have had zero firsthand experience at juggling multiple jobs and income streams and all the rest of it. So, number one is it stressful and number two is it, you know, kind of better than a traditional job because you’ve certainly got lots of stuff going on or is it oh no, everybody if they had a choice would love to be an accountant working at the same big accounting firm for 20 years?

Chris:                I think yes, it’s stressful but I don’t think that necessarily means that it’s bad. It’s like anything else, there’s so much nuance in what you want your working life to be. I think that it’s very interesting right now. There’s a couple of things happening, I read something the other day that was just talking about how much we romanticize this idea of working for yourself a lot. And so that’s definitely a factor. Oh freedom, you can do whatever you want, you can work from home in your pyjamas every day, the whole day because you don’t have set boundaries on yourself and that’s really difficult. And enforcing that structure on yourself is really hard. It’s not as simple as that.

                          And it’s – but at the same time it’s not as simple as saying 9-5 or stable of whatever that looks like, is the answer, is the preferable for most people. I think that people are really thinking about what they want from their work. I think that in the same way that people are rethinking what they want to kind of spend on as far as wanting to connect with the rise of socially responsible investing, just making more conscious choices about what they want their money to go towards.

                          I think people are thinking about how they want to earn and I think one of the most important words that is kind of bouncing around is the idea of flexibility and that’s worth a lot. That being said that doesn’t have to be found in a self employed world or in a multiple income world and often that’s not flexible at all. You know, you’re just kind of juggling to make ends meet.

Doug:                So if I said to you I’m starting this new opera and it’s going to run for 10 years, like I don’t know, Cats, that was a think it wasn’t an opera but it ran for a long time or Come From Away with probably be going forever. So, would you rather be on that show for the next 10 years you know exactly what you’re doing, exactly what show you’re doing, you could live in the same place, not change or would you say you know what, I kind of like three months in Paris, a couple of months in Toronto, like what would you pick?

Chris:                I like the variability. That’s what I want but I know artists that would love that kind of stability. It comes with a trade off, it always comes with a trade off. In finances aren’t we just talking about tradeoffs all the time? I think that what we need to get better at is getting clear about what the trade off is. Because I think that it’s really pitched this idea of oh, just do this, you know, just be on your own, this is so much better than going into that job every day. And it’s not that clear, it’s getting a clearer sense of what that can look like.

                          The problem is, is that it looks really different when you’re balancing four restaurant jobs so that you can audition and maybe get an acting job versus balancing three careers – three kind of things that you own, that you’re more in control over and more in control of your shifts but that’s still stressful because you’re more in charge of kind of bringing in that income and making sure you’re hustling to have things – keep the lights on, right?

Doug:                Yeah there’s pros and cons to each. So okay this show is called Debt Free in 30, we talk about debt. So when someone comes in to see you, you know, one of your opera singer buddies or whatever, and they’ve maybe incurred a bunch of debt because maybe I’m going on auditions and doing all this – but now I’ve got some kind of money coming in, how do you advise someone on how to make a plan to get out of debt when you only know for the next couple of months what your income is going to be, you can’t project it months and years forward? Is there any kind of structure you can put to that or how do you do it?

Chris:                Completely and it’s something that I work with a lot of people with. It’s a combination of two things. One stabilizing your cash flow, it’s exactly what we were talking about before, the idea that you need to figure out a lot of the time our debt comes from not accounting for the costs that we know about. Sometimes it’s a surprise thing, a tree falls on your car, you know, you can only do so much. But you can do things to prepare for auditions, putting away money for business. You can do things to prepare for Christmas, it’s not business but it’s the thing that hits you every time.

Doug:                And I can tell you December 25th, that’s when it’s going to be this year so you can mark it down. Okay, so number one, stabilize cash flow.

Chris:                Stabilize cash flow is a really big reason but that’s really a symptom of the most important thing which is stop looking at the number, look at what caused the debt. And your first step is not to pay off this debt, it’s to stop more debt from happening. And so it’s about looking at the – $20,000 of debt, $30,000 of debt isn’t the same for everybody.

                          And so it’s not just about coming up with a payment plan, it’s about trying to figure out how you can restructure your life and restructure the way you do things so that debt doesn’t happen again because people – so many people, you must see this all the time, they’re caught in the cycle. And this is so bad for variable income earners because you have a $10,000 month and you put $9,000 onto the credit card. Amazing, I’m paying off things and you’re using it next month again and so it goes back up, back up, back up.

                          You need to stop the cycle first. So that I would rather, I tell clients all the time be like we’re going to pay minimum payments on your credit card for awhile while we stabilize things and then we’re going to start making payments one way. I would rather $25 goes on your debt over and above your minimum payments and doesn’t come back, than this thing that you’re doing right now.

Doug:                Giving $200 and then borrowing 175.

Chris:                It’s so – not only from a financial point of view it doesn’t help, it’s so demoralizing. It’s so hard if you feel so trapped versus slow, steady sustainable progress. That’s the only solution. And what comes from who you are and where that came from more than, you know, the numbers and the interest rates it’s important but, you know, that’s the last step.

Doug:                You’ve got to stop the bleeding first.

Chris:                Stop the bleeding first.

Doug:                And then you can work on stabilizing the cash flow. And obviously as you go through that process, if it turns out well, I’ve got $50,000 worth of debt and I have no hope of paying if off, that’s when you’re coming in to see me.

Chris:                That’s when I’m sending people to see you.

Doug:                Yes because that’s all you can do but at least you’re realistic about what it is you can do. People in your line of work well, I might end up getting up a really big show and I may end up having this all cleared up in six months. So I guess knowing where you stand is critical.

Chris:                But that hope can be really – that’s a difficult place to be in because people push it and people push and people push it because tomorrow I could get a movie and I could pay off this debt in one go. But the truth is people always think things will change when they get more money but more money doesn’t change behaviour, it amplifies current behaviour. And so you have to change your habits now, you have to setup an infrastructure now so that that’s why that $25 debt payment is so important because then if you get the movie you can add two zeros to that debt payment.

                          But if that pathway isn’t there you’re not paying off your debt and if you are, you’re not taking care of your life. And so you’re going to end up at risk for more debt. And at a certain point the biggest cost of debt in so many people’s lives isn’t the financial cost, it’s the weight that they’re carrying all the time. They’re carrying around that shame, they’re carrying around that guilt. And it’s affecting the way they do their jobs, it’s affecting the way they live their lives. And sometimes it’s like go through the consumer proposal now. If you get a great gig, okay.

Doug:                Pay it off then.

Chris:                Pay it off more quickly, exactly. Just start moving this needle forward and stop having the spectre looming over every audition. You know what makes an audition go well, going into a room and saying I need to get this otherwise I won’t be able to make my rent next month.

Doug:                Yeah and you almost for sure won’t get it then. It’s a karma thing. And I see that in every line of work, that okay I’ve been laid off so I’m applying for that job at the accounting firm or the engineering company or the construction company or whatever. If I go in there in the good frame of mind I get the job. I have had tons of clients over the years who have been down, they do the proposal, they do the bankruptcy, whatever, they get rid of the debt and then three days later they get a job. And they’re like I don’t get it, I’ve been trying for six months. Yeah, but you finally took the weight off. I think that’s excellent advice to end it. How can people find you?

Chris:                You can find me at ragstoreasonable.com. All my information’s there about the kind of people I work with, what that work looks like. There’s a blog, I’m even part of a podcast called Because Money.

Doug:                And how can they find that?

Chris:                becausemoney.ca. With Sandy Martin and John Robertson and you can find me on Twitter and Instagram at @ragstoreasonable. My big focus really is providing accessible one on one help and so I run monthly free office hours, three hours of free office hours on my site. You can sign up for those for free. They’re all online, my practice is online so I can talk to people all around the world. Those are no strings attached, I’m not going to try to talk you into anything, just for a chance to talk out any things that are on your mind.

                          I also do pay what you can financial planning for lower income people where I’ll subsidize the remainder of what you can’t pay. Sometimes there’s a bit of a waiting list but when that can happen – because in my practice I also donate 10% of everything that people pay to a fund that helps people who can’t afford financial planning, afford financial planning. So you can find all those details on my site at ragstoreasonable.com.

Doug:                Excellent, perfect. Chris, thanks for being here.

Chris:                Great to be here, thanks so much for having me.

Doug:                That was awesome. That’s our show for today. A transcript for today’s show notes, including a link to Chris’ website and twitter profile and everything else can be found at hoyes.com. Thanks for listening. Until next week, I’m Doug Hoyes. That was Debt Free in 30.

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