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When I read articles or books on budgeting, I often feel envious of how easy they make it seem. They can plan out their budget for the entire month, even the year, by just plugging numbers into a formula or divvying their money up based on preset financial commitments.
It’s not so much their ease when working up a family budget that makes me jealous (okay, so maybe a little), but it’s that they have a consistent income that makes each month the same as the last.
What do you do when you have no idea what each check will hold, from week to week?
Except for one year over a decade ago when I was teaching English in China, I have not had a steady, regular income. Either I was working part-time, where the hours continually fluctuated, or I had a salary job that I paired with a tipping job (in my case, waitressing), or it’s been my husband’s income (also tip-based).
This was no problem when we were younger and our expenses were much lower than our incomes. But, as our family expanded, so did our monthly bills. Now, things are a lot more of a tightrope walk, and with each check being different than the last, budgeting is not as easy as those Pinterest infographics make it seem.
If you’re struggling to make a budget, and make a difference in the way that you spend your money, here are a few simple steps that can help you create a budget that works for you, no matter how you much, or how often, you get paid. These steps are integrated from the two resources that I found to be the most useful, along with some of my own thoughts:
Ready to Make a Budget?
- Start tracking your spending. As someone who loves making lists, I have to admit that I really don’t like doing this, but it is important! So, I offer you the same encouragement that I give myself: suck it up, buttercup. Gather receipts for all of your expenses for one month and then catalog what you are spending your money on.
If you are someone who makes multiple trips to the store each week, then you may find yourself with 20+ receipts by the end of the month. Unfortunately, there’s no easier way to do this that I have found (if you know of one, please let me know in the comments!), so you will have to go through each one.
With this information, you can get a better idea of where your money is going. I discovered that I was spending way too much on weekly donut splurges for the family. Our weekly treat was adding up in ways I hadn’t realized.
Maybe you’ll wonder why your clothes spending is twice that of your food, or why the electricity bill is higher than it should be. This is a good way to get a handle on what you’ve been doing with those paychecks so far.
- Prepare a budget based off of your pay period. We get paid weekly, so I create a weekly budget. If you get yours bi-weekly, monthly, or even in the form of a sporadic commission check, budget with that money when you have it. The more infrequently you are paid, the more you need to prepare so that your check stretches to cover your expenses until the next one arrives.
- Your formula. I use Mary Hunt’s basic formula, dividing your income into three parts:
80% Expenses + 10% Giving + 10% Savings = 100% of your Income
- Giving: This money can be spent as you see fit, either being used for tithing, sponsoring a child, making donations to your favorite charity, or giving back in some other way.
- Savings: This money has a few different jobs. The first thing you want to use it for is an emergency fund. Whether you decide to create a set amount ($1,000- $10,000) or you add up 3-6 months of expenses to get the amount you need to live on for that length of time, it’s up to you.
Once you have a sufficient amount in your emergency fund, then that 10% can go into a savings account (or better yet, an IRA or some other account that will help your money to grow).
- Expenses: This money plays multiple roles, too. This will pay for your bills, your irregular expenses (i.e. quarterly insurance premiums, yearly back-to-school supplies, Christmas gifts, etc.), and debt repayment.
With this money, you’ll be paying all of your regular expenses — the mortgage, your cell phone, the power bill, etc. — as well as your irregular expenses. But those are handled a little bit differently.
Instead of being smacked with a big bill every three months for your insurance, calculate the cost of the year divided by 12 (months) so that you can put aside a little bit each month. That way, when the bill comes due, you’ve already got the money for it. Decide how much you are going to spend on Christmas and take the year to accumulate that amount.
If you are in debt, it’s important to get out of it as soon as possible. Obviously, that can only be as fast as you can afford. So, begin paying down your debt with anything you have left of that 80 percent.
Dave Ramsey has a term, gazelle-intense, which refers to the sprint to pay off your debt. I agree with the idea, but it can be harder to cut corners when you have kids. Not in the one-less-birthday-present kind of way, but in the eating-Ramen-every-day-for-a-month way. Go as fast as you can while still taking care of your family.
How you pay your debt is up to you, but paying off the things that have the higher interest rates first is usually the best plan. My one caveat to that is if you owe money to someone (like friends or family), pay it back before those credit cards. I’d rather repair and maintain relations with my loved ones than save money.
- Write it out. You now have a plan, but how do you implement it? Write it out. I do, every single week. Here’s an example (with unrealistically round numbers):
Income for the week= $1000
Giving – $100
Savings (to emergency fund right now) – $100
Expenses – $800
- Bills that are due this week – $450
- Money for irregular expenses (to be saved until needed) – $175
- Debt repayment (personal loans, credit card paydown) – $175
Total: $1000 – All of the money is accounted for and everything is paid.
- Tweak your plan. You’ll find that there are things that work really well for you, and others that don’t. So give yourself the time and freedom to make changes as necessary. But stick to your budget for at least three months (six is better). Allow it time to work. You’ll be so glad that you did.
I really hope that these ideas will help you create your own budget, regardless of how inconsistent your income may be. Remember that budgets aren’t meant to limit you; they are there to make sure that the money you work hard to earn is spent in ways that better your life.
Do you have any tips for creating a working budget with an inconsistent income? Or any income, for that matter? Please share your thoughts and suggestions in the comments below!