Sprint: How to budget for a fluctuating or commission based income

One of the questions we get all the time is how budget for a fluctuating income.  Teachers, per diem workers, business owners, employees with hourly pay with bonuses, people paid with commissions or even just not paid on a set schedule say that it's impossible to budget for that.  You're not alone and we're here to healp.  We don't want you experiencing feast or famine with your budget where you are living thin then you get a large paycheck and you go celebrate or live a little too loose.  We don't want you to have the roller coaster ride that so many people experience.  We want you to plan your budget just like you are getting a steady paycheck.  Steady paychecks are nice and boring and when it comes to budgets, boring is good. 

There are a few steps to take and actions to employ where you can make your fluctuating income budget your best friend.  Here's how:

1. Get your expenses dialed in. Get them super consistent and organized.  Do this by writing them down in due date order.  Also, really think about what is a need versus a want and eliminate the wants if you feel they are adding to your stress.
2. Get the actual amount of what your expenses are per month.  Bills, money for food, groceries, savings accounts, etc. 
3. Create a deposit account where all of your income will go.  Whenever you get income you deposit all the money right into that account. On the first of the month you pay yourself a set amount out of that account into your checking account. That set amount you pay yourself equals your expenses.
4. You can look at that deposit account as often as you want so you can see when you need to really ramp up your commissions or make more income.
5. If you get a lump sum payment infrequently (teachers getting paid once at the beginning of the school year), you can put that lump sum in the deposit account and give yourself a paycheck until the next lump sum comes in. 
6. Estimate low. If you're not sure what your next check is going to be, estimate low so you're not going to have issues with overextending yourself. 
7. Expect it later than what you're thinking.  If you're not sure if your next check is coming in February or March, budget for March and if it comes in February you'll be pleasantly surprise and if it comes in March you will be prepared.
8. Set a priority list of what expenses are really important or what is not necessary.  Do you really need Netflix and HBO the next few months?  Can you spend less on eating out or drinks over the next few weeks?  If it comes in higher or sooner than you thought you will know exactly where it is going and being very intentional and disciplined with your money.

 

• You can find out more about Fiscal Fitness Phoenix financial coaching here
• You can find out more about Financial Coach Academy here