How to Budget an Irregular Income
from daveramsey.com on 03 Aug 2009
If you're among the many Americans who are self-employed or working on commission, your somewhat unpredictable income makes it tough to create a budget. But that doesn't mean you don't need one! No matter how you get paid, you've still got to stick to a plan so your irregular income doesn't get out of control. Even if you don't know how to budget, we'll show you how. You can't use that excuse anymore!
First, start with the Monthly Cash Flow Plan budget form. This step helps you figure out precisely how much money you need each month in order to cover your four walls (food, clothing, shelter and transportation). Once you understand that budget form, you can move on to the next one, the Irregular Income Planning form.
In order to fill out the Irregular Income Planning budget form, take a look at your first budget. List each item according to its importance. The most important item on that plan should be your first item on your Irregular Income Planning form. Pay that item. The second most important item should be listed second on the form. Continue the list in this way, ordering from most important to least important.
When filling out the form, remember that how much you need for the item goes into the "amount" column, and the running total (starting from top to bottom) goes into the "cumulative amount" column. For example, let's say that food is on the first line, and you need $250 a month to feed your family. The amount you need to pay, $250, would go in both the "amount" and "cumulative amount" columns. The second line has gas with $150 per month, which means that $150 would be listed in the "amount" column. The total of those two columns, $400 ($250 + $150), would be listed in the "cumulative amount" column.
Continue to create your Irregular Income Planning form in this way until every spending category is listed on your budget. From this point on, when you receive a paycheck, take the amount and spread it out to the items on your budget, starting at the top and working down. Your check may not cover everything that is listed. That's okay. Use it to pay as much as you can. Then, when your next check comes in, pick up where the last check left off.
Sure it may be a little bit tedious and unpredictable at first, but implementing a budget into your everyday life will help you control your spending, live with a plan, and build wealth so you're not worrying about having enough money to cover your four walls. Take Jamie's word for it:
We composed a new Dave Ramsey-approved budget and started using cash more often instead of the debit card. We quickly learned how to tighten the spending strings! Even though we are only on Baby Step 2, we are just thrilled that we have one less bill to worry about. Now that we have a precise budget, we feel a new sense of empowerment in knowing how much money we have, what we are going to do with it, and what we need to save. It's nice having a little extra left over each month to apply to our debt.
Jamie in AR
Learn all the ins and outs of budgeting with Dave's life-changing program, Financial Peace University.