Budgeting With Unpredictable Income
I'm sure I'm not unique but we are a one income family with an intermitant income due to my husband's new business. Although he's been out on his own for 2 years now and it makes enough to support an employee, the money doesn't come regularly. So he can usually pay the bills and payroll but sometimes we don't get paid. Such is the nature of your own business, I'm told.
I was used to having a budget and was doing pretty well living within it and not using the credit cards until the last couple of months when we haven't been paid a regular paycheck. It's quite difficult to maintain a budget when there's no budget to even speak of! Does anyone have any tips? I would love to hear back.
We face the same issue in our home. I haven't solved all of the bugs by any means, but here is what we do:
Our business is seasonal, and January through June are our leanest months. During summer and fall, we pay ahead on all of our fixed payments (mortgage, student loans). I pay more than the minimum on every payment, but my goal is to have those fixed payments payed through June.
For meat, we buy a side of beef and extra chicken, etc. in the fall and store it in our freezer. We have found that farmers in our area generally are anxious to get rid of their livestock rather than feed them through the winter. This saves on the day to day grocery bills.
Additionally we try to save major purchases for the time of year that we have the most income. That way we can pay cash - or take advantage of "90 days same as cash" type offers.
I would analyze the last two years and try to "guesstimate" your leaner and thicker times of the year, and base your budget on those. Good luck!
Autumn in Michigan
Talk to a Credit Union
First, get rid of the credit cards. Visit your credit union and see about getting a line of credit. If you can make payments ahead to bump the due date when you have the funds, you may be able to ride out your periods of low income and skip payments. With credit cards you must make a payment each month or you will ruin your credit.
Plan on Yearly Basis
Take your annual income and divide it by 12 to see how much you average per month. (If you make $40,000/yr it comes out to $3,333/ mo.) Then set aside taxes into a savings account, and use the remainder as your monthly "budget". When you earn more than that amount in a month, you still need to spend as though you only have your budgeted amount, then when you aren't earning as much, the extra from previous months should roll over to make up the difference.
Just Use Envelopes
Congratulations on being a business owner, and welcome to the pains of it as well as the benefits. My husband is in the exact situation, where no budget is allowable. We have only been able to make ends meet since we've started an envelope system. Each bill has it's own envelope, and on the outside of that envelope we keep all information pertaining to such bill.
Each week that we get paid, before anything else, except tithes and taxes, we deposit into every envelope (if financially able). If we cannot fill all envelopes, we fill the largest and most important ones first. This seems to be a little difficult at first, but we just started with $50.00 per week in at least one of the envelopes until we got every one filled. Only then did we start taking money out for our actual bills. Once you get started on this program, you will find that you actually have a little spending money each week, because your bill money is already put in it's place. Occasionally we still lapse into getting behind, but we continue on until all envelopes are filled once more. I really love this system.
Open up a savings account for only the large bills you have. Next, figure out how much each bill will need weekly in order to stay caught up (remember the $100. for house?) When you go to the bank, just deposit all your large bill money into that account, and have your payments automatically deducted. This system works well for us with taxes.
K. H. in Tennessee
When I don't get food money every week, I take money when it comes in and buy much macaroni and cheese (a good-tasting off brand), spaghetti, rice, potatoes. If I have no built up cash, I buy "loss leaders" (things I use only) that stores use to attract customers. I go to all my local stores, making a circuit. If meat is on sale, I buy 4 pkgs instead of two, and a few fresh and frozen veggies to get me through the week (unless of course the frozen veggies are on sale). Thus, I begin to build a good amount of staples and add-tos at great prices. I continue to look for "loss leaders" each time I shop. They often rotate about once a month or every six weeks. During this "storing up time," I spend very little on frills, and I always try to save a few dollars back on each shopping trip. Within a few weeks, I have quite a bit of money to take advantage of sales saved up, as well as even a little to spend on extras (which I also never pay full price for). I also put a few dollars aside during each "feast" week to store up for no-paycheck times. It works! I have fed a family of five for up to seven weeks without paychecks this way, though I don't advocate living with that much famine! A big part of the secret involves setting a weekly budget for food, and paying yourself back for each week you missed a paycheck when the money comes in.
Clothing works the same way, only I determine to set aside a little each time I am paid. It takes a while, but in the end I ended up with a good amount if I am careful, persistent and determined. I shop by catalogue part of the time, but when I do, I make sure the items are on sale. The last catalogue sale I shopped on waived all shipping and handling charges, so I bought quite a bit.
I helped my cousin who is a Ford mechanic, and works on "commission" to finally come up with a budget. We took the average paycheck over a six month period of time. If you don't know what this is, just start with what you think will be the minimum amount that would come in, in any given month. Next, we divided his yearly and bi-annual expenses, to come up with a monthly payment amount. Next, we added in the monthly expenses: car payment, rent, cellphone, pager, and any other fixed items you might have. Notice, we haven't gotten to gas and food, yet. Since his gasoline bills are pretty steady - his travel to and from work is always the same, the gas bills were easy to figure out, and come up with a monthly amount. For food, we came up with what was reasonable, given he eats out at lunch, and wants to eat out for dinner, but could save a lot of money, if he cooked at home for dinner instead.
The best part of the above was that he now knew what the minimum monthly amount was going to be, in order for him to pay all his bills, and eat, too! He realized that he had to give up getting his clothes drycleaned, had to budget carefully for any new clothes, and now knew when he had to volunteer for Saturday work, to bolster his income for the month.
The hardest part was to get him to open a savings account - to hold the money he would put aside each month, for insurance and other non-monthly bills. Once he did open the account, the other fight was to keep him from using it, for clothes, or some trip he decided he just had to have. But, since he has resisted a budget for all the years I've known him, getting him to the set of steps that I did was victory enough.
Carrie R. in Fairfax, VA