Budgeting on an irregular income!

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rfp80
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Budgeting on an irregular income!

Postby rfp80 » Tue Jun 19, 2007 1:45 pm

Hi all

I've been lurking on the forum for a while reading all the wonderful threads.

I want to ask you for your advice in budgeting with an irregular income.
I work freelance at home and my wife is attending school. My income varies A LOT by month and I get paid pretty randomly. I've therefore had a hard time making my monthly budgets.

What do you / have you found the best way to budget with an irregular income and random payments?
Any advice would be greatly appreciated.

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pf101
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Postby pf101 » Tue Jun 19, 2007 1:55 pm

Have a HUGE reserve fund is pretty much the only thing you can do. For most people 3-6 months of expenses is fine but for freelancers and those who are self employed it's better to have 9-12 months of expenses liquid in case you hit a dry spell. It's for people like this that IO loans were developed. Too bad so many other people abuse them.

Your monthly expenses shouldn't change, just the income. So you need to figure out your monthly budget and then use your buffer fund to pay those bills when your income doesn't cover them and replace that money when the money comes in.

consultantjournal
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Postby consultantjournal » Tue Jun 19, 2007 3:23 pm

I have six months of expenses set aside and can access more, if needed. I'm self-employed.

For forecasting earnings, I take an average of the previous X years of earnings.
Andrea Coutu
Consultant Journal
www.consultantjournal.com

Slytherin
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Postby Slytherin » Tue Jun 19, 2007 9:17 pm

How about setting aside a certain percentage of your irregular income? Say 20%. You'll be saving something each time you get paid.

rfp80
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Postby rfp80 » Wed Jun 20, 2007 8:46 am

Slytherin wrote:How about setting aside a certain percentage of your irregular income? Say 20%. You'll be saving something each time you get paid.


Yes, that's what I currently do.
10% goes to savings/emergency
10% goes to paying our debts
5% goes to our allowances
1% goes to charity

The rest is for the rent, daily spending and such.

consultantjournal
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Postby consultantjournal » Wed Jun 20, 2007 11:18 pm

But do you have any emergency savings established already? If you can build up a nest egg, I think those numbers will be fine. But, till then, you need to find a way to save up some money quickly.
Andrea Coutu
Consultant Journal
www.consultantjournal.com


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