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Ask Dave

Over The Hill And Through The Valley

Shannon doesn't know how to smooth out the rough months with her husband's variable income, but Dave does.

QUESTION: Shannon’s husband has a variable income, and she doesn’t know how to make a budget for it. After digging a little deeper, Dave finds their problem, and knows how to fix it.

ANSWER: The issue here is the unpredictability. If you have a check coming 5 days late, your budget is in trouble. Sharon and I combined our regular budget with what we call a “hill and valley” fund, like a savings account. When things are good, we set money aside for the lean months. It helps to smooth out the waves. If you get a $6,000 check in, you might throw $1,000 in that savings account and pull it out when you need it. Do this as you are paying off your debt snowball. Don’t put quite so much on the debt snowball and put a little into the account.