Just wondering if anyone else had a highly fluctuating income and how you budget for it?

I heard a similar question on a Dave Ramsey podcast and he suggested just to budget for the least amount. But those of you with this type of income know that some months there is hardly anything. How do you manage?

For us, I try and work with averages. I keep track of our income every month in an excel spreadsheet and then have it automatically calculate what the average is so far in the last 12 months. This way if we see a trend going down, we know we are going to have to cut back a little farther. Any surplus month to month goes into a savings account which we then access on a low month.

The other problem with this type of income is that when the economy suffers, so does the salary. Gas prices go up, inflation goes up, donations / car sales / funding for projects, etc goes down and those who depend on those things have even less to live on with higher expenses to cover.

How do you budget with a highly fluctuating income? What do you see are the pros and cons to this type of income?

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Mom to dd (age 9) and ds (age 11)
blogging daily about purpose and personal identity

My family and I used to live on commision and let me tell you it stinks. We would always budget on the lowest amount he would make. We would have all our bills laid out and know what had to get paid no matter what soooo when our life depended on it which it did for a long period of time we woould just pay the essentials and hope and pray the next check wo9uld be better so we could pay everything else. Another thing we would do is every year at tax time we would pay off as much debt as we could that way we didnt have as much hanging over our head. A lot of the time we fo9und some months were better than others and we would pay extra on the utilities and stuff to give us a credit so during the bad months it was so bad.

We don't have a fluctuating income, thank goodness, but my parents raised us on commission. My Dad was a salesman in the electronics industry. He sold capital equipment to big companies - a lot of military contractors and such.

Anyways, now that I am an adult, I have no idea how my mother (the budgeter) remained SANE! I asked her about it and she said through a lot of prayer. She was the queen of frugal and taught me a lot of my frugal ideas. I think she would save a lot during the really good months (commission on these machines were five figures, but there were months none were sold as the "process" took months to work on a sale). She would then pull out money as needed from that in the slow or recession months. I think she would use the minimum amount possible.

The one thing I saw her never skimp on was tithing. That was a given. She always taught me that God will provide for us and anything he gives us is a gift from him.

For those of you that live on commission, I commend you! I would definitely go insane with worry, but that is just me. I try to be more like my mother, but I will never get there, I fear.

DH is self employed as a contractor, he also owns a rental property - his income overall is unstable. It's either feast or famine with him - right now it's famine. He just completed 3 jobs that earned him almost $2,000. The customers have up to 30 days to pay... some take the full 30 or more. The second story of his rental property burned down in January, we are rebuilding out of pocket because it was not insured so we are not getting any rental income. Our saving grace is my income, it is full time and enough to pay the bills (but much else)

We use my income to pay the bills, when he gets paid he pays the bills for the rental (trash removal $400 everytime the dumpster is emptied, and wages for laborers helping DH tear it down) If we have any left over we put 3/4 of it into savings and hopefully we have enough to go out once a week for dinner and a movie.

My only comment that hasn't already been mentioned is to budget your utilities so at least that doesn't change each month if you don't already.

I agree it sucks, especially with inflation of all your expenses. I would say keep doing what you are doing, roll over extra income into an emergency fund so you have cash during the months that are lower commission.

DH could make more money working per diem, but neither of us would be able to sleep at night - I think you have to have nerves of steel to manage!

I would imagine that the cash system would make the most sense in this case. And leveling the utilities so everything is predictable each month. At the first of the month - pay bills, take out the cash for everything else and when it's gone - it's gone.

Good luck to you!

The majority of DH's income is tips, he handles all the money. I honestly don't know how he budgets, he has ADD so he has his system to keep everything straight and I don't interfere. He handles bills, tells me what we have leftover each week, we go from there for household spending.

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I see more cons with this type of income than pros. This is the type of income my dh has and it is frustrating some times. I try to take the months that there is a surplus and save some of it. That way its just like it didn't even exist and we can use that as a cushion for the months when there isn't as much money, but its not always easy. It seems like there is always something coming up.

Now that I am going to be quitting my job soon, I am really worried about his unstable income. Dh doesn't seem to worry about it which just makes me worry even more. Its a vicious cycle, lol

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Proud mommy to adorable Kinsley

My husband is a farm equipment technician, and during the winter his paycheck is pretty small, just the 40 hours per week. Then, when spring planting starts and through fall harvest he can work up to 80 hours per week, getting overtime pay.
Interestingly, I went back to work somewhere last August where it helps equal things out -- the school. I don't have a 12 month contract, so I go three months without a paycheck, but those are some of his highest pay months...it's actually helped us out more than I thought, and I only bring home about 500/month after daycare.

Then, we'd have small windfalls at tax refund time, bonus at Christmas, etc... and those would either be used to catch up or to treat ourselves to something we'd been doing without while we were waiting for the right time, for instance, we lived with a sheet over our bedroom window for months until we could use "extra" money to buy fabric to make curtains.

It wasn't really just as simple as budgeting for the least...before I went back to work, there wasn't enough in the winter to pay all our bills, so we'd fall behind about a month on utilities and then play catch-up when the paychecks got bigger. Not an optimal way to live, but it was the only way to survive. Things are looking up though, we have started this summer with all our utilities paid up and it looks like we'll be able to take a small vacation to the Twin Cities to visit family this July!

Being behind was really a fire under me when I decided to go back to school full time online at the same time as going back to work. I know that when I graduate in a little under a year I will contribute substantially to the finances!

Oh, my goodness. I think we're married to the same man!

The pros that I can think of are.

Faith ... my faith has increased 100 fold over the last 10 years. Every month we depend on God to meet our needs. We are continually amazed my the miraculous ways that our needs have been met. Consider the lilies....

Windfalls. (sp?) We can get more rather than living on a small fixed income... some months there will be a huge increase. We can take these 'bonus chucks' and put them towards the mortgage or retirement, or towards something on our savings list. Most of the time they go into overflow savings which we then have to access in a low month.

The cons

STRESS!!!!! Faith is a process. Even though our needs have always been met (many times in miraculous ways) I often wonder if this is the month we'll end up on the street eating cat food.

The economy: These types of jobs / work are often tied to the economy. It goes down, our income goes down. Makes it really hard to plan.

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Mom to dd (age 9) and ds (age 11)
blogging daily about purpose and personal identity