DR Budget Question: When you rely on OT

[onlygirls]

We are on BS2. My husbands paychecks can fluctuate from $1,500 w/no overtime to $3,500 with 40 hours of OT per pay period. He always has OT, but sometimes it does not get all the required signatures in time for the pay period and he gets stuck with a crappy check.

His last check of Feb was $3,500 and we paid off one CC that was $1,400.

First check for March was $1,971. That was enough to pay our bills and groceries, but we don't get paid for another week. I had to transfer $200 from our emergency fund.

When he gets paid again, hopefully they catch up on his OT and we can put the $200 back in the emergency fund.

I am wondering if we should pay as much as we can toward CC debt or be a little more conservative with our payments in case this happens again. Ex: I could have paid $1,000 toward the CC and saved the $400 for next month. Then if we were short on OT, we would have a small cushion.

Let me know what you think!

[eirual]

I'd start a sinking fund for monthly fluctuations. If you can, figure our your average income and adjust all other monthly income so it ultimately equals that average (e.g. if you typically bring in about $2,000, cover your expenses, use the rest of that $2,000 to pay off debt, then put whatever's beyond that $2,000 into a pot for another month when things are low and you need to borrow from it to make it to the $2,000). Once you have a month's pay or whatever you feel would cover a month or two's differences on standby, you can use the excess to pay off debt.

I'm no financial expert, that's just my first instinct. The commitment is not to borrow again, and you shouldn't be borrowing from your EF for shortfalls (this coming from the woman who just used hers to re-do her kitchen). Ideally, you'll have planned and enough saved and reserved specifically for the fluctuating income and that would separate from your EF.

[BetsyS]

My dh doesn't get OT, but he works on comission, and the comission check varies each month.

Do you have a base of how much it takes you to live? For us, this is the basics (mortgage, gas, food, utilities), as well as our debt obligations. This is considered our base need. Everything above that is gravy, so to speak. The "above that" includes all entertainment (for us, this is a $12 TIVO subscription and the newspaper), cash money, haircuts, gifts. Basically all stuff that can wait.

So, in my budget categories, I have things prioritized. Right under our base, I have a category called "saving for low months". If a comission check is not our base amount, then I pull from the savings to cover that base amount. If a comission check is over that base amount, some money gets save to fund those low months. Before any fun stuff, any savings, any discretionary spending. Cause, really, that "saving for low months" is just as necessary as the utilities. Without it, we'd have to go into debt if a comission check was low one month.

But, for us, the first step was to figure out what was absolutely necessary each month (and thus worthy of dipping into our savings), and what could wait until we got a bigger/better check the next month.

[yeahwhat]

I'd do what someone else suggested. Keep an extra amount, above the emergency fund, and call it a salary fluctuation fund.

DR budgeting doesn't have to mean spending every dollar as soon as you get it. It means giving every dollar a job before you get it. Sometimes, the job of some money is to sit tight and wait for a future expense.

[onlygirls]

I see what you are saying, save some of the extra money extra for small paychecks. We had a $1,500 paycheck last year after we went on vacation for 2 weeks so there was no OT on that check. Yikes! Now we know if we are going on vacation, we need to have a post vacation fund.

I have a spreadsheet that lists all upcoming expenses for that paycheck. Bills, pre-school, dance tuition, soccer shoes, book fair, etc. But if he gets a low paycheck, there is not enough for everything so I prioritize what gets paid. Food, house payment, etc. and if something can wait, it gets bumped to the next pay period.

When we are done with our debt snowball we won't have to live on OT. Right now, we can't pay our bills without it.