How can you decide how much you have for bills and expenses when
your paycheck varies from one payday to the next? That's a
question a lot of people struggle with.
A few of the occupations that I can think of off hand that could
fall into this category are waitresses or waiters working for
salary and tips, truck drivers that are paid by the mile and
never know how many miles they are going to get, the
self-employed that their business income varies from season to
season, and the list could go on.
Trying to manage your finances with a steady income is hard enough
but when you never know what your paycheck will be seems almost
impossible, but it's not. It is, however, going to be a little
more tricky.
In my Budget and Bill Organizer I talk about averaging your
expenses like your phone and electric bills that vary from month
to month. The same principle can be used to average your income.
The first step you need to take is to find records of your pay
for as far back as you can. It would be best if you had records
going back for at least 6 months.
Take these records and total the amounts you were paid for the
entire period. Then divide that by the number of months you have
records for. This will give you your average monthly income.
If you don't have any record of your previous pay you may need to
go to your employer to get the information. If there is no way
to get this information you should start a log of how much you
get paid and use this to develop your budget.
Once you have determined your average monthly income you will
need to develop your budget just as if this was your regular pay.
Here's where it gets tricky. You aren't always going make the
amount you have budgeted. The only way to handle this is to
save when you make more than what you have budgeted.
Here's an example:
You have determined that your monthly budget is $2000 per month;
In January you earn $2500. You will need to put away $500 of
that money so that you can make up for any month that your
income falls below $2000.
This sounds like a simple solution to a complex problem but it
may not be as easy as it sounds unless you accustomed to saving
money. It will take some discipline to make sure that money is
there when you need it.
There could be a bright side to this method. If you are able
to put the extra money away and you have several months that
you make more than your budget you could end up with a sizable
savings account.
When setting up your budget make sure that you don't
underestimate your bills and expenses. This is one of the
major reasons many budgets fail.
By averaging your income it will prevent the "Feast to Famine"
approach to your spending. It only makes sense to spread your
income out so that you can cover all of your bills and expenses
every month.
About the Author
Terry Rigg is the author of Living Within Your Means - The Easy
Way http://www.homemoneyhelp.com/ebookadpage.html and editor
of The FREE Budget Stretcher Newsletter and Budget Stretcher
web site http://www.homemoneyhelp.com. He has 25 years of
experience counseling individuals and families concerning their
personal finances.