30-Day Economic Stability Challenge: Creating order with financial plans

You get a lot of advice on financial planning, but with our erratic pay schedules and so many unknowns, how do you apply it? I asked Katrina Ramser how she deals with it. Katrina, you may recall, wrote a bit about business plans in a previous challenge and has written about finance on the fab financial blog Get Rich Slowly.

Katrina divides her time between teaching swimming to kids and adults, writing about automotive, outdoors, swimming and personal finance topics for magazines and Web sites, and writing her own blog, SquidKid.

Perhaps your finger is on the financial pulse of the best: Orman, Warren, and Ramsey, along with grassroots money marvels like J.D. Roth of Get Rich Slowly and Trent Hamm of Simple Dollar. Maybe you're wondering if the advice still works for your self-employed status. As a freelance writer I was there once with tons of too much good financial advice and not sure how to customize my long-term financial plan.

Here's how I did it:

First Earn and Divide Your Money.

Be honest with what you're making or realistically will make by divvying up what you'll earn by client or service this year:

• The first 30% of non-taxed income goes into an untouchable savings account.
• Realize 50% of your take-home pay, no matter how it flucuates, goes to Must-Haves (rent, food, house bills).
• Another 30% goes to Wants (cabel, clothes) and 20% to Save/Invest -- unless you are in debt.

Remove All Debt.

Yes, it hurts, and it might take years. If you cannot pay anything you own off in 20 months, get rid of it (omit a morgage). Your IRA or cable TV dreams -- meaning Wants and Save/Invest balances will suffer because you'll need to throw every available dollar at the past. But nothing improves your self-employed life for the better than getting out of debt.

Have the Necessary Insurance & Wills.

Have Health (and Car if you need it) right now, buying higher deductibles to lower your premiums. Pass on Life unless someone counts on your income; but having a Will and a Living Revocable Trust with an incapacity clause (handles your retirement/savings, loans) will be be a relief to your surviving loved ones.

Now You Are Ready to Save & Invest.

When the debt is gone and you're affording insurance, Save/Invest 20% -- broken down by putting:

• 10% in a Roth IRA or SEP; and
• 10% in an on-line savings account you'll call Emergency Fund, which accumulates to reach 4-8 months of income in case you lose a client.

Automatic deposit means commitment. Think about stowing a portion of your 30% Wants into another account for "unexpected-expecteds" like new technology, insurance dues, professional organization fees so the bills don't disrupt your monthly budget.

Funding Big Dreams Comes Last.

When the Emergency Fund gets maxed out, you'll put that 10% into an account for a home, vacations, or organizations you can get behind. Maybe beef up your Freedom Fund more.

That the above is easier said than done is an understatement. Regardless, the advice still rings of truth, no matter how you scoff, grumble or worry about it. Learning the new realities in order to financially successful -- whether self-employed or not -- is about prioritizing, focusing and developing better money habits.

Photo by cupcakes for clara.