how would you budget with an irregular income?

[leigh09]

We are self-employed and our monthly income has extreme highs and lows. Anyone have budgeting advice for us or tips from being in a similar situation? It was easier for me to budget when I had a steady, regular paycheque. Our main cycle now is to either try and save the extras from the good months or use the extra to pay off the debt remaining from the last bad months.

[shayinme]

Do you have a base amount of money you can expect every month? If so that helps a great deal. My dh has been self employed going on 8 years and budgeting is hard, but when we have a minimum amount we can expect then I am able to plan a base budget of things we must cover every month. Also on the months you have higher income, try to save and pay things that don't need to be paid monthly.

I wish I could say its easy but its not. I found its easiest when I work (which I do now) and my income helps to fill in the gaps. For instance our car payments our taken from my salary since I get paid on a regular schedule.

Also you want to have a nestegg for the times when money is slow to arrive, that has been the biggest stumbling block for us. Car repairs or other things happening and you are waiting for checks.

[Denvergirlie]

The best way to handle this is to get ahead... I know sometimes it's easier said than done, but you need to have at least 2-3 months of expenses in an account at all times, so that when the larger months occur, you fill that fund, and can pull from it when the lean months occur.

[CookiePie]

We have a similar but different scenario as our pay is seasonally affected. So I began using a spreadsheet a few months ago, to track all money going in & coming out. It is labor intensive keeping track of receipts & remembering what needs to be input. But it has really opened our eyes. I think it will take a full year to see the full picture, & it still will not forcast exactly how much we will make the following year, but it should help guide us, showing a pattern.

I know it isn't helpful for the present, but I hope it will allow us the freedom to not have to use cc's to get by. Might be woth a shot. In the meantime I'm super duper frugal especially during the lean times! And I'm paying down debt like crazy when I have extra.

[lucifugous]

I recently saw that DR has written specifically about dealing with a variable income. I think the basic idea was, line up everything in order of importance, and pay the most important stuff first! Like pay housing costs and make sure you have enough for food with whatever income you first get, then just continue down the list. It's a good way of looking at it all. Even if you don't have enough to cover everything, you are getting the most important things taken care of before, say, the Netflix subscription

[hopefulfaith]

Originally Posted by lucifugous

I recently saw that DR has written specifically about dealing with a variable income. I think the basic idea was, line up everything in order of importance, and pay the most important stuff first! Like pay housing costs and make sure you have enough for food with whatever income you first get, then just continue down the list. It's a good way of looking at it all. Even if you don't have enough to cover everything, you are getting the most important things taken care of before, say, the Netflix subscription

This is what we do. I know I can expect a base amount of money because dh is paid regularly from his salaried job. However, we both have side jobs as well, so there are three jobs between us which means that some weeks we have more than others. I have a spreadsheet that I print out each month which has a list of every bill we owe, starting with mortgage (!) & going on down the list in the order of when they're due. I pay bills twice a month, and whatever isn't paid on the first round, I pay on the second date. I time it so that my second pay of the month pays the bills which are due during the first half of the following month. However, if we have more money during one round, more bills might get paid than usual.

[jtsmom]

My dh has been self employed for a long time. His is usually the only income, but I think ideally, it would be good if I had a job that had health insurance and some steady income. Someday, maybe. Anyway, this is how I do it.

First off, since our income is sporadic, I do everything by the month rather than the week. The way my dh's business is set up, he could make a lot one month, and none the next. We live very frugally, so everything is as low as it possibly can be (propane, electricity, no cable, etc)

Towards the end of the month, I pay all of the business bills: the cell phones, the suppliers, the insurances, the payroll taxes. Then I write down a list of all the household bills (remember they are as frugal as possible) I first list the bills that need to be paid, mortgage, utilities, insurances, property taxes, then I budget an amount for the month that I'll need cash for (groceries, gas, misc, tithing, spending money for dh and I) then I also set money aside in a freedom account to cover annual or biannual bills each month. I then add in credit card payments and dr and dental bills due. I add it all up and hope that there's enough in the business account to cover it all. If not, I tweak the things that I can, pay less on the credit card, take less grocery money..... I transfer the whole month's worth of household bills all at once and take out the cash I'll need for the month, then I pay all the bills at once.

I really like this method, I only have to pay bills once a month, and I"m good at budgeting, so if I have $300 for the month for groceries, I can make it work. In a tight month, I can fall back on my credit cards if I need to. Anytime you have sporadic income it helps to have savings to fall back on. I strive to have at least 6 months worth of living expenses saved up, but it's hard to do.

I hope that all made sense. The short version is: pay your employees and business bills first, keep your household expenses low, and put the rest into savings. And do it monthly, not weekly.

[leigh09]

you have great ideas. i am currently a SAHM, we have 3 children ages 4 months - 4 years. i would also ideally like a job with regular salary and health benefits, but it won't be a while ... until my youngest is school-aged.

i should also try to get into paying monthly vs weekly and seeing how we can cut back on the household expenses

[Staceyy]

I find the best thing to do, is to pay your bills ahead when times are good. The utility companies will generally give you a discount for doing so. Also its good to stockpile food, paper goods, toiletries etc. so you have all of this when times are lean. Also, put extra cash aside.

[yukookoo]

kind of the same idea as someone else said but i was trying to get at least 1 months salary ina savings account, then pay with that for the month and take dh's checks and put them in a savings, then budget at the end of the month so on the last day of the month when we get dh's 2nd check i know how much i have for the next month.

Of course savings is super important but we are very month to month around here. It took over a year just to get 1 months salary in a savings to be able to start this..