One of my concerns with the possibility of leaving my day job and pursuing self-employment through writing and managing websites is the unpredictable income. At the extreme, my biggest concern is the idea that it’s quite possible that the income could drop off permanently due to forces beyond my control. But even if that doesn’t happen, the ability to earn income from blogging and such could vary widely from one month to the next.

Budgeting can help, but the problem with a budget is you have to assume a certain amount of income. That’s the first suggestion from Money Magazine in a recent article about living well on a “flexible” income. The article suggestions taking your lowest annual earnings from the last five years, divide that number by twelve, and use the result as your monthly spending limit.

It would be a good idea to inflate your emergency fund. The typical advice for an average person calls for three to six months’ living expenses in a liquid savings account (though you might prefer a more tiered approach to an emergency funding plan). People with unpredictable income may benefit from beefing up the emergency fund to cover one year’s worth of expenses.

Is that too much? If I were approaching a year without income, I probably would have found another job by then, taking what I could if necessary. I suppose it depends on the marketability of one’s skills.

The Money Magazine article warns about underestimating your financial needs in retirement. Rather than anticipating that you’ll need 80% of your income once you retire, a rule of thumb touted by some, look at your current expenses and try to determine what they might look like when you no longer have the desire to work. Perhaps there are some expenses you could reduce while other expenses might increase. Focus on the necessary expenses rather than the income needed.

If you plan for a conservative income, it’s likely you’ll have excess some years. Money Magazine suggests using your surplus cash to build or replenish your emergency fund first and pay off debt. Additional extra cash can be saved or spent.

Insurance should be a concern, too.

For life insurance, consider what portion of your yearly expenses won’t be covered without your salary. Multiply that by the number of years you want coverage (until your kids finish college or you hit retirement is typical). Add in any big stuff like kids’ college costs.

While the article is geared towards people who work for an employer and have an unsteady income, like someone who works on a 100% commission basis, the advice works for independent consultants who need to find clients and other self-employed individuals.

5 ways to manage a ‘flexible’ income, Amanda Gengler, Money Magazine, September 2, 2008

While I haven’t decided whether I’m making a habit of this, earlier today I asked Twitter users whether their current job is related to the field in which they earned a bachelor’s degree. The unique thing about Twitter is that responses are limited to 140 letters and spaces, so it’s a challenge to condense a full thought into one repspose.

Since I am assuming that those who responded publicly are fine with me posting their answers with attribution, here are some of the responses.

• Mmmeg: LOL! Majors were classical studies (Latin) & Spanish linguistics, minors linguistics & foreign lang. ed. I work at a fashion site.
• frugalbabe: nope. degree in psychology, minors in math and econ… working in the health insurance industry.
• ericyng: No. I work in IT.
• PenelopePince: B.A. in Interdiscplinary Studies: Linguistics, Spanish, French, Madarin & German; Minor in Music. I own a pet clothing business.
• nodebtplan: in Bus. Management—working as a recruiter now… so I’m in the business world. Kind of a broad degree. Working on MBA as well.
• Gingerlatte: BA Criminal Justice Yes. I work with women who are on post release by providing psychotherapy and group counseling.
• TheHappyRock: Yes, Comp Science. Although I do have an MBA now too.
• bripblap: have a BA in math, MBA in accounting and working in accounting – so half and half
• Private: I have a B.A. in Art History. I got an M.A. in the same field, then an MSLS. I’m back to working with art history now, but in a library.
• conedude13: Kind of. have a bs in ee but am programming c++ code but am considered an engineer in my dept. Confusing, but was doin civil eng b4.
• MrsMicah: English a field? i mean, English lit and libraries kinda go together…
• SunFinancial: BS, MS, and PhD all in EE, am working in that field.
• uppervalleymom: BA in Government,MS in Evaluative Clinical Sciences (public health-y)working PT at business school now, but was in nonprofit exec dir
• guppie: B.S. in biology, working in web development
• hank_MiB: BA in studio art. currently IT manager, but still do a bit of art on the side
• BurgBarbL: I majored in history and English and use skills from both of those in my field (publishing), if not in lit or history directly

By my count, there are seven polled whose work does not somewhat relate to their bachelor’s degree while ten who are employed in roughly the same field. There is a lot of pressure for high school juniors and seniors to choose a school and their career path or a “major.” Should there be so much pressure when students are still trying to determine their long-term goals and discover their talents?

I decided my career path early on in high school, without much pressure, but I eventually steered my life in a different direction, like a good portion of the people who responded to the poll. While my major remained constant throughout college, my minor floated from computer science to psychology to music management/music business, but during that time I was interested in at least two others.

This poll will tie into an upcoming article. Thanks to everyone who participated. Follow me on Twitter to participate in future polls.

Perhaps you have seen this. It may take the form of a manila folder containing a list of names on the front and a card and an envelope in side. Some of the names have been crossed off and perhaps even there’s a dollar amount written beside those. The card has is a generic “get well soon” message on the front and is signed by your co-workers, many with just-as-generic wishes like, “Get well soon! Hope to see you back.” The envelope has money contributed by your co-workers, and you’re next on the list.

In the past few months in my office, we’ve had numerous employees on medical leave, baby showers, and other random parties, all which seem to require a donation of some type. This has always been fairly common, but the volume has increase lately. I always participate, but I’m starting to grow weary. If someone chooses to have elective cosmetic surgery, do they still need recovery gifts?

Do you participate in these giving rituals? If you do, are you motivated by guilt at all?

A reader was kind enough to forward to me a helpful article published by the New York Times, guiding new graduates in the right direction as they take on their first real full-time job. Many graduates have had experience in the work force before, but it’s not until graduation when they can truly begin focusing on their careers and the benefits they provide.

While I wrote yesterday about general financial tips for college graduates, the New York Times article hones in on that first job so those in this position know what to expect and can make some of the right decisions about benefits.

In fact, health insurance ranks at the top of the importance ladder.

Health insurance is expensive. Employers generally pay for some or most of it, but usually not all. You’ll probably pay your share of the cost in at least two ways. First, your employer will probably take some money out of your paycheck regularly. This is called the premium. Then, there’s something called a deductible, where each year you have to pay at least the first couple of hundred dollars toward many kinds of medical expenses…

Thinking back to my first job, no information about insurance was explained to me with clarity. Like many others, I was able to determine the definition of terms like “premium” and “deductible” as I went along, but I could have benefited from some of this basic financial information at the outset.

The article also provides basic information about payroll taxes, or why you never seem to take home as much as you think you’re earning. PaycheckCity is a helpful website recommended by the editors that provides several basic calculators, a walk-through of the W-4 form, and some additional features if you’re willing to pay.

What about retirement? This is an issue that are far from the minds of many freshly minted graduates, but when you’re right out of college is the best time to start thinking about the distant future. Even in the face of bills the likes of which you’ve never dealt with before, the article suggests taking advantage of your company’s 401(k). The article suggests making this process easy:

...[C]onsider investing in something called a lifecycle or target-date fund, which is fast becoming a standard offering in retirement plans. These funds will have names like the 2050 fund, which correspond to the year when you’ll probably be thinking about retiring. Managers allocate the money (mostly in stock mutual funds now, though the investments get more conservative over time), and all you have to do is shovel more in.

Regardless of investment, the best thing about many 401(k) plans is the employer match, as I’ve mentioned earlier. Anyone fresh out of college should recognize the value of “free” money. (Sometimes there’s a catch, such as you have to work for the company a certain amount of years before the money actually becomes yours, but everyone knows that there’s no such thing as truly free money.)

A Primer for Young People Starting Their First Job, Ron Lieber, New York Times, June 14, 2008.

I’ve been at my current company for six years now. That’s quite an accomplishment as I intended to work for this company for a short time while seeking out something more meaningful. As I’ve stayed with the company while moving around to a variety of departments, I’ve accrued to privilege of taking an increasing number of vacation days.

Here is our policy, modified a little bit for sake of quasi-anonymity. Every third year of service, an employee receives three more days added to their pool, starting with the first full year of employment. During employment before the first full year, vacation days are awarded at a rate of 1 days per month for the last six months of the year and 1.5 days per month for the first six months. 6 “sick days” are added to these totals, but they’re similar to vacation days in all respects except one: Don’t take more than 6 unplanned sick days in any 12 month period.

Any unused vacation days can be carried over to the following year with a maximum of half the total allotted vacation days. I have 24 vacation days this year (not including 6 sick days), plus 4 carried over from last year.

Last year, I took 17 out of the 28 total vacation days available to me. I should take more, particularly due to the health benefits of two-week vacations. Several studies show that Americans take fewer vacation days than workers in other countries, and we are awarded fewer days than workers in Great Britain and France. In 137, paid vacation is mandated for employers, but not in the United States.

Do American workers have a responsibility to take as few vacation days as possible? How many vacation days, or how much of your “allotment” do you take?

When I first read The Millionaire Next Door by Thomas Stanley and William Danko, it didn’t inspire me. It’s not that I disagreed with the authors, but I found the book uninteresting. It was one of the first financial books I read after beginning Consumerism Commentary, and it came highly recommended from readers here and participants in The Motley Fool’s community.

Without getting too much into my problems with the book, I will say that the idea that a “millionaire” is more likely to be your local business owner rather than someone born into a family of money was new to me.

Recently, PNC Wealth Management conducted a survey of people with more than $500,000 free to invest as they like, a fair definition of “wealthy,” and possibly “millionaire” once you begin including home equity and other assets. Only 6% of those surveyed earned their money from inheritance alone. 69% earned their wealth mostly by trading time and effort for money, or by “working.”

Here are some interesting statistics I pulled from an article discussing the survey results.

• 36% of earners and 27% of heirs are concerned about an economic recession.
• 77% of earners and 67% of heirs believe they have a lot of control of their financial future.
• 39% of earners and 21% of heirs are moderate or risky investors.
• 75% of earners and 50% of heirs have less stress thanks to their wealth.
• 51% of earners and 33% of heirs believe their wealth has led to increases of happiness.
• Heirs are twice as likely to believe that their wealth causes more problems that it solves.
• 37% of earners and 25% of heirs believe that luck played a major role in their financial success.

For me, the choice is clear. There is only one option if I want to find myself with $500,000 of investible assets: earn rather than inherit.

[Yahoo Finance, MarketWatch: Earnings Growth]

Earlier today, my boss at the day job informed me of my raise and bonus pursuant to the annual review process. There were no surprises; the corporate world—particularly in my non-sales-generating area of the corporate world—continues to fail to impress when it comes to monetary compensation. They say the benefits are good compared to the rest of our industry, but sometimes I feel management believes likes to perpetuate that feeling to keep good people from leaving. Before announcing compensation changes, the human resources department conducts a tour explaining the “total benefits package,” ensuring employees are looking at the whole picture when comparing their salaries to those at other companies.

Anyhow, I’ll be receiving an increase of $2,000 per year, the same as last year. My bonus reflects about 7% of my salary, and my “salary grade level” allows for an incentive range of 0% to 9%. The bonus is in line with last year’s as well. As I said, there were no surprises.

This year, I’ll have some opportunities for moving forward within the organization. If they don’t work out as planned, I have other options to consider. SmartMoney Magazine interviewed me for an article the other day (but may not cite Consumerism Commentary because I refused to give them my real name) and the conversation is getting me thinking about the viability of blogging full-time. Being able to work on Consumerism Commentary and other web projects full-time would allow me to devote much more time to writing—it’s very difficult to manage what are basically two full-time jobs right now without the quality of one suffering.

This is a guest post from Bri M. Bri is a recent college graduate and aspiring web entrepreneur. He writes about online innovation at Trailblogging. Here he presents eight ways beginning entrepreneurs like himself can save money while working on their endeavors.

1. Moonlight as an Entrepreneur. This is the one that many people think of the most often. Do your day job and then put in as many hours in at night and on the weekend as possible until your venture is netting you enough money to do it full-time.

The pro is that you can still count on your steady paycheck while being in control of your venture, the cons are the risk of overworking yourself into losing motivation, not being as productive because you have to switch from one mode of thinking to another, or not having any time to live life.

2. Find a Part-Time Job. This is the spin-off from moonlighting as an entrepreneur. Instead of moonlighting as an entrepreneur, moonlight in another career. Whether that is being a waiter/waitress or working in a retail store part-time, it just would have to be something that is less than 40 hours a week.

The advantage of this route is the extra time you get for your venture (which you still control), while still having some extra cash coming in. The disadvantages are that you are still not devoting all of your time to your passion and you lose the benefits that are often associated with a full-time job (health, etc.).

3. Save Up and Stretch Your Dollar. Instead of trying to kill yourself by working two jobs, you can stay at your current job and pinch pennies or work overtime for a while as you save up some extra money. Most financial advisers will tell you to have three to six months’ worth of expenses saved in a way that it can be immediately accessible in case of an unexpected job loss or other emergency. In this case, you are going to need much more than that. Not only do you have to cover your regular living expenses, but you need to have cash on hand for business expenses (which can be a lot or a little depending on what your venture is) as well.

After considering start-up capital and business expenses, you should try to shoot to save up two years’ worth of expenses, with at the least one year’s (most successful businesses take at least two years to become profitable). During this time, especially at the beginning in order to get into the habit, you should be stretching your dollar to the maximum possible.

The good thing about this approach is that you have complete control over where your business is heading and you can devote the maximum amount of time possible to it. The bad thing is the risk of having the bottom fall out and running out of funds. In which case, don’t despair, you can still jump into the other avenues at this point as well.

4. Get a Personal Loan. Many banks offer personal loans for new businesses to get started. You get your money that you need to start and work on your business and you pay the bank back later with interest. Very simple.

The good thing is that like #3, you can devote as much time as possible to your business. The bad thing is that you owe the bank money (and nobody likes debt), so not only so you have to pay the bank back, but you are also exposing yourself to a lot of risk to your personal assets. This can be very bad.

5. Get a Business Loan. Similar to #4, get a business loan. The big problem with this one is it can be very very hard, or nearly impossible for a new business to get a business loan from a bank. Existing businesses often have to problem, but getting approved for a business loan with no personal exposure is something that many banks shy away from. The good thing is that unlike a personal loan, you don’t have to worry about the bank coming after you.

6. Get an Angel Investor. “Angel Investors” are typically wealthy individuals who believe in your idea or goal and are willing to give you some money to achieve it. What’s great here is that you are not exposing yourself personally as you are with the personal loan, and often these investors often do not set up the same requirements as banks do for schedules payments. Instead they often receive partial ownership of your venture, and that’s the bad part. Some investors may be relatively hands-off, others will view will want to become involved because their money is invested.

7. Get Venture Capital. Oh, venture capital, the doubled-edged sword. With venture capitalists, the biggest concern to keep in mind is that they are looking to make a profit with their clients’ money. Maybe your idea can help many people, but the venture capitalists are looking to turn a profit from your noble idea. Not to say that they don’t agree with it, but it’s the business they are in.

The upside is that you can work on your idea and you have the funds to start, as well as many venture capitalists can bring some useful experience to your disposal. However, there is a price and that’s a large part of your venture, including the decisions that will be made.

8. Borrow from Friends or Family. If you can swallow your pride and ask for money, which many people cannot bring themselves to do, this can be the best and worst thing that you can do. Why is it the best? These people (typically) have your best interests at heart and genuinely want to help you, and it you make it, then people close to you are coming away with some green, too.

Why is it the worst? Money is a touchy subject and no matter how well you think you know someone, money can turn that relationship sour if things don’t go well. Also, you can get some very opinionated people talking about things that they know little about.

Personally, I have been directly involved with #1, #3 and #8 for my ventures. I would recommend #3 above all because then you are your own boss without any outside interests controlling you, yet you get to devote as much time as possible. I should tell you though that I am a fan of pancakes for every meal and multiple blankets in the winter. In all seriousness, #3 allows you to work as hard as you can on your idea while, at the same time, giving you complete control over the direction it takes, though it is definitely the hardest route, it is the most rewarding.

Read more from Bri at Trailblogging.