Budgeting with a Variable Income

Depending on how you manage it, money can be a great blessing or a great curse.  We’ve been on both sides of that equation where money was working against us or like now, it is definitely working for us.  It seems like some folks hear budgeting and they get super nervous, add to that the anxiety of a variable income and some might quit before they even start.

Well, I’m here to tell you, budgeting on a variable income is doable and can even be fun!   Ok, maybe not a blast but let me break this down for you!

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Before I get too into it, if you subscribe to the blog, you’ll get my budget templates emailed to you almost immediately FOR FREE!!  Be sure to subscribe, I promise I won’t spam you and all that jazz.

I talk about how Dallas and I budget over on my Budgeting 101 post.  If you haven’t, check it out.  In a nutshell, we complete a zero-based budget monthly. That means that we account for each dollar of each paycheck and zero our checking account with each check.  Okay, we do have a $50 buffer in there because I’m human and make mistakes, but we pretend that $50 isn’t there.  Now for us, our budget doesn’t change much.  We’re both salaried so a variable income isn’t a factor.

That said, if you have a variable income you can definitely complete a zero-based budget too, you’ll just have to take a few simple steps to make it work.

To start the zero-based budget with a variable income, you’ll look at all of your paychecks from the last year, and I’m talking take home pay here.  Find your smallest paycheck from that time frame.  (As long as your variable income isn’t seasonal, you can look at six months’ worth of take-home pay if that makes you feel better.) Anyway, find that smallest check amount and base your budget on that.

If your smallest paycheck was $1,500 over the last year (or six months) and you get paid twice a month, your monthly budget will be based on $3,000 income.

What about the paychecks where you make $2,000 instead of that $1,500?  Depending on your money goals, you’ll take that $500 (which is like you gave yourself a raise, nice work!) and apply it to your goal.  If you’re saving, that $500 goes to savings.  Paying off debt?  Boom! Now you have an extra $500 debt payment.  Make sense?

What do you do if that smallest paycheck doesn’t cover your monthly bills?  Frankly, you need to increase your guaranteed take home pay.  Figure out what you need to do to make sure that your bottom line is covered.  If your variable income is performance based (sales or other), dig in and find out exactly how many widgets you need to make or sell and go after that each month with crazy intensity.  Don’t settle for anything less, you simply can’t afford to.

You can also ask for a raise, get a new job or get a side hustle.  Also, cut out unnecessary expenses or try to negotiate some of your current bills.  You might be shocked how much you can save here.

Need side hustle ideas? Check out this post (Side Hustles) to get you started!

One great way to lower your monthly student loan payment is to refinance.  Lower interest rates are out there and SoFi is a great resource!  With excellent interest rates, they are helping student loan holders lower their monthly payment amounts and pay off their student loans quickly. They even let you pay to principle only when making extra payments which is a huge win! Check out  SoFi and let me know how it goes!  I love a good success story! 

Just a friendly reminder when it comes to budgeting… It’s going to take you some time to get used to!  Give yourself a whole lot of grace and be patient.  It will take the average person a good 90-120 days before they have the budgeting thing down.  And even then you may make some mistakes.  Shoot, I messed up royally a few months ago.  Just press on, keep your goals in focus and keep at it.  Soon you’ll be a pro!

Until next time, spend safely!

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