Budget on a varying income?

littleskintdragon

Just after a bit of advice from some clever people.
I get paid monthly, but a lot of my pay is commission based, i was just wondering how other people in a similar situation manage to budget properly?
My basic income is very low and i couldnt base my budget on that and treat my commission as an extra which is a shame.
Thanks in advance for any help or tips

3wisemonks

Dh income varies I work out an average from the previous year and use this as the basic. Anything over this is put by the the bad weeks ie. Under the basic. Dh is down this year by £5000 so far on comparison to last year which when you consider his industry is supposed to be picking up doesn't bode well. So if you haven't got an emergency fund in place I would recommend starting as you never know what is around the corner.

Tbh I find it a pain in the proverbial and we had this for 13 years but I'd love to have some clue as to what he was going to bring home at the end of the week.

I would suggest trying to do a budget with your basic plus a little extra if this isn't enough alone. Anything over that put in an emergency fund and a yearly bill fund for example council tax and car insurance. If you can pay these yearly it will lower your basic monthly outgoings giving you a better chance of being able to live by the basic and a low commission.

Silian

Attend the YNAB Improving workflow class - they cover this there.

http://www.youneedabudget.com/support/training-and-education

Basically you put "extra" money (money more than you need to live this month) into a buffer. Then you draw from that buffer in lean months.

Dobbibill

littleskintdragon wrote: »

My basic income is very low and i couldnt base my budget on that and treat my commission as an extra which is a shame.

How long have you been getting paid this way?

Can you go back over your payslips for the last 12 months etc and calculate your lowest pay and work a budget based on that?

I'm not in the same situation, so hopefully some more experienced posters in this position will be along soon to advise you on what works for them.

Good luck with it all

DB

littleskintdragon

Thanks everyone!
3wisemonks thank u we do have a small emergency fund, not big enough, but im trying to pay off debt first cc debt and an over draft so im trying to prioritise that, and i have shares due soon, so that'll help. Great advice thank u.

Silian - i'll have a look at that! Great.

Dobbibill - i was full time until i went on maternity leave last year and now work part time, so i havent got a lot to look back on as yet, but definately a good idea for when i do.

concrete_kid

A couple of friends get paid like this and they get paid into one account and than have a standing order into their current account on the same day for an amount they are comfortable with. I suppose the first account can then be treated a bit like a savings account, and means they are not tempted to overspend when they have a good month. They then dip into this when they have a bad month.

littleskintdragon

Concrete kid thats a really good idea. I suppose the other option is transfering out the excess into a savings or another account. Thanks for that. Some good ideas.

cakeforbrains

I've budgeted on a varying income for a few years now, not always successfully (as it's bloomin hard work). My tips are:

1) DON'T take an average of your income and apply it to your budget unless you're going to, as suggested above, always have enough of a slush fund to cover the difference between your lowest possible pay and your necessary outgoings.

2) DO take into account that your tax will also be variable. If you earn some big pay packets at the start of the tax year you will effectively overpay on them and the right tax amount may not be sorted until the end of the tax year (depending on how variable your pay is).

3) DO have a 'rolling budget'. I do ours on a simple excel worksheet. It has one column for income, one for outgoings, and it effectively lists everything that will need to be paid for at least the next 12 months, alongside a guesstimate of pay. A third column keeps a running total. As and when the actual pay hits the bank I update the spreadsheet and I also put in any one-off outgoings as I know them (this may be in advance or after they've been paid). I marry the spreadsheet up with the actual bank (through online banking) at least twice a month, ticking off and adjusting as I go. The major upside of this is that, even if one month looks flush on its own, I can see that, say, six months down the line we might be heading for the red, and I can hold back on spending accordingly.

As from a couple of pay days ago we've managed to get ourselves into a position where we can base out 'master budget' on our minimum income, but this has taken years and has come about through a combination of base pay increases and reducing our outgoings. That means that anything 'extra' (ie. earned by overtime) can go to debt repayment (over and above the minimums) and a degree of spending. If you can aim towards this scenario it really does make a difference.

Good luck!

littleskintdragon

Cake for brains thank u for the advice. I would love to know that my minimum is all i need to get by and anything above that is a bonus. That is defiantely a goal to achieve. Well done getting there and thanks again