Picture by Jeff Keen
We’ve all heard it—some of us have even said it– “I can’t make a budget, I have a variable income.”
See Maeghen’s post below—we’re lying to ourselves. You can, and if you’re on a variable income, you must have a budget.
I’ve been living on a variable income now for 14 months. Sure, my husband has always been overtime-eligible so our income has varied a little but now it’s varying wildly—sometimes going over our “base” income by as much as $6,000 in a month.
Taming the variable-income budget takes practice, and the more you work at it the better you will get.
Here’s the what you have to do.
1.Identify your median and minimum monthly income. I keep a spreadsheet showing invoices out and when I expect them to be paid. I keep a running “average” of my billings by month. My husband keeps a list of overtime hours to estimate how much more than usual will be on his paychecks.
2.Use the envelope system. For expenses like shopping, gifts, gas, food and entertainment, this is a must. Other things like rent and utilities will be fairly static but you have to have some way of tracking your progress over the course of the month, especially as you may be learning your income at the end of the month.
3. Collect all of your bills and place them in a prioritized list. Here you should see your household expenses retrospectively. You know you spend $XXX on rent, $XXX to the phone company and $XXX on food. Create a list of priorities from the top to the bottom with a running total to the side. If your list reaches $6,000 a month but you have only $4,000 for the month, adjustments will have to be made, or someone won’t be getting paid this month, which brings me to my next point…
4. Either budget based on your lowest regular income (we do this at our house) or have a second “emergency fund” that can be used when times are leaner than usual and that you immediately replenish when times are better. (This is different than the “fix the radiator” emergency fund.)
It really is that easy—have a plan and follow it. You’ll be thankful and you’ll see yourself getting ahead faster than you have before. Also, when you’re acutely aware of where you’re at income-wise for the month as you go along, you’ll find yourself “hustling” just a little bit more to meet certain goals or to “beat your average” or trying to break your all-time high income.
Good luck!
Tagged as: budget, variable income
Similar Posts:
- Every Day I’m Hustling!
- 4 Keys To An Easy Budget
- Hasta La Vista, Visa!
- Budgeting Projected Costs and Exact Costs
- How much should you spend on . . .
