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How To Put Together A Budget With Irregular Income

By Erik Folgate

One big mistake that personal financial gurus tend to make is assuming that we all live on a steady monthly income. When in fact, very many of us are salespeople that earn an income based 100% on commissions. One month you might make $10,000, but the next two months you might not make a dime. This can pose a problem for those people who want to stick to a written budget, but they don’t know how to budget their monthly expenses and savings when they cannot predict their income for that month. This is a tutorial to help all of the salespeople out there stick to a written budget without pulling your hair out.

  1. Project your minimum income for a given month. If 100% of your household income is based on commissions, then you should make sure that you have some bread and butter commission that comes in fairly steadily during the month. And for months where you make a killing on commissions, put the extra money aside to cover you during months that the commissions are low.
  2. Prioritize your expenses. This is the key to writing a budget with irregular income. List your most important expenses and bills first and get those bills paid FIRST when money does come in. No, this is not your credit card bill. First on your list should be food, utilities, rent/mortgage, and transportation. Then, you can pay your debt bills like credit cards and student loans. In no way am I saying to blow off your debts. You have a legal and moral obligation to pay them as promptly as possible. However, when it comes down to it, you have to care for your families basic needs first. Don’t ever pay the cable bill before buying groceries, that’s the point.
  3. Don’t underestimate your food and grocery category. It’s very easy to underestimate this category, so set a general number and be ready to adjust it as you settle into your budget over the next couple of months.
  4. If your married, write the budget together. I am a strong believer that you need to sit down together as a couple to write your monthly budget each month. This doesn’t mean that you both need to be the financial nerds in the family. Only one of you needs to keep the spreadsheet or balance the checkbook, but you BOTH need to communicate about where the money is going and how much is going there. It’s not fair to the spouse that handles all of the finances to make all of the decisions as well.
  5. Give your budget time to work. You must give your budget a chance to work. You can’t drop it after one month, because you spent too much or didn’t get a bill paid. Give your budget at least 3 to 4 months to work itself out. You’ll get a better idea of how much you really spend on groceries, gas, and household goods. Entertainment and eating out are categories that you can control by your behavior, so don’t blame your budget bust on the fact that you didn’t account for how much you eat out. Just stop eating out so much. It’s that simple.

For those of you that work on straight commission, you have a tougher road in terms of making a budget work, but the purpose of this post was to show you that it can be done. In fact, you are in a better position than those with a fixed income, because you can control how much you make, for the most part. You have an unlimited potential for monthly income, which should be an exciting thing to think about. I don’t live on a commission based income, but if you have any questions, contact me by clicking on the “submissions” page above or leave me a comment and we can try to solve your problem together.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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  • http://firefinance.blogspot.com/2008/03/sunday-review-9.html FIRE Finance

    Fantastic post. We cited it in our Sunday Review as one of our favorites.
    Keep up the excellent blogging.
    FIRE Finance

  • http://www.amidclutter.blogspot.com megscole64

    Thank you for this! In a couple of months I’ll be leaving a job where I make a steady paycheck every two weeks to a commission based job. I’m scared out of my mind and hubby is starting to get cold feet as well (he will still have a regular salary). It’s going to be a HUGE culture shock to us both. And putting together a budget will be a huge challenge for us.

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