beingfrugal.net

I’ll admit I’m no financial guru, but if there’s one thing
I’ve had to learn over the years, it’s how to budget on a variable income. My husband has worked on commission for as
long as we’ve been married, so we’ve never really had a steady income from
month to month. Here are the steps I
take to deal with this difficult situation.

If possible, average your income over the past year or
two. This should give you a good idea of
how much you have to work with each month. If that’s not possible, try to budget no more than your base
salary. If that’s still not possible,
cut all expenses as low as you can go and still be able to survive.

Make a budget based on the above figure. Try to be really conservative in your
figures, but be realistic, too. I
remember when I made our first budget (and keep in mind I was very young and
inexperienced), I thought $80 would be a good number for the grocery budget…for
a month. Be realistic. Keep track of every penny you spend for a
month, so you know what your spending habits are.

When you get paid, keep the total amount of your budget in
your checking account to pay your monthly bills, and deposit the extra money
into a different account (I call this the slush fund). So if your budget totals $2000 a month, and
you get paid $2500, $2000 would go into your checking account, and $500 would
go into your slush fund. I recommend
that you keep these accounts at separate banks. I know I’m always tempted to just transfer extra money into my checking
account if it’s too easy. 

When you have a paycheck that’s less than your budget, dip
into the slush fund for the difference between your paycheck and your budgeted
amount. Now you have enough to live on
for the month.

It’s helpful when starting out to make a very conservative
budget, so you can build up your slush fund at a rapid pace. Once that slush fund is well funded, you’ll
never have to worry about a bad sales month again, at least not from a
budgeting perspective.

It’s not easy budgeting on a variable income, but it can be
done. Building a little bit of a slush
fund saves you from those bad sales months, where you have to wonder how on
earth you are going to pay the rent. Making a budget is definitely worth the effort!

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