Learning the value of a budget can be a liberating experience. You finally realize that you can begin telling your money how to work for you rather than constantly reacting to your expenses. However, for people with an income that varies month to month this realization can come with a follow-up realization: It seems to be so much simpler to make a budget when your monthly income is the same every month.
In some ways it is simpler to budget when your income is consistent month to month, but even if your income varies there is an approach that can help you plan to meet your goals.
- Take an annual approach: When your income is the same every month, you can seperate your planning into pay periods and still implement practices that help you keep a balanced budget and meet your financial goals. When your pay varies month to month you need to look at all of your months. Set your sights 12 months into the future.
- Anticipate income and expenses in each coming month: Building your budget months in advance will help you spot the times when you know you will be in trouble. When you find the months that you are spending more than you are making you can make a plan from preceding months to cover that month’s deficit.
- Include savings and Debt Payments as “bills”: Be sure all of the details are covered when you list your expenses. Think of everything that you normally forget and give it a spot in your annual plan (examples: car tag, Christmas presents, tax preparation fees, an unexpected car repair or medical copay).
- Keep records and follow up each month: As you go through each month you will need to make corrections to your projections. We all know unexpected expenses occur. Update your monthly information to what ACTUALLY happened, then look ahead and work on finding and fixing any new trouble spots.
Click here for a downloadable Cashflow Spreadsheet template that will help you get started. This practice may seem cumbersome at first but it will cut down on budget surprises and really make you a better budgeter!
