Budgeting tips

Most people have spent some time on their budget, and have in fact probably done a great job.  There are different kinds of income though, so be sure to make a budget that is tailored to your specific needs.  Lot’s of people make a steady paycheck, but there are also lots of jobs where your income will change based on time worked, performance, or commissions.  These are some things that can change your budget and need to be accounted for when you are managing your finances.

I will use myself for the first example.  I have a steady paycheck that comes every two weeks, but I do extra things at work to increase that paycheck.  My wife is a teacher and gets paid during school, but not during the summer months off.  So we have a mostly steady, but somewhat variable income stream for the year.  What this means is that we can’t spend during the summer like we can during the school year.  We are making less money.

The way that this is compensated for budgeting is to make two budgets.  I simply make an excel spreadsheet and put in a low income and high income budget.  I make one budget where it shows how much we make on the good income months and another for the lower income months.  This also allows me the chance to see about knocking down any recurring debt I might have missed or that is optional for the summer.

Payment shock is the term used to describe the difference in amount payed when one buys a house.  This same idea of income to bills payment shock also occurs during the summer.  Depending on how big a difference that is, you might not really notice things, or you might have to make special adjustments like setting savings aside during the good months.

Don’t forget to keep track of your expenses.  This is the number one thing you have to do in order to control your finances.  If you don’t know where your money is, how can you take care of it?  This becomes more important as you get into commission budgets and personal business budgets.

When you have a sales job that is only commission, you are going to have variable times of income.  This makes it much more important to have some type of cash reserve or allowance system setup to make sure that you have enough to pay your bills and also live on.  The first idea is that you keep are fairly large cash reserve in your account that you make all your transactions through.  This way you will be able to pay things as they come.  The downside is that you have a lot of cash sitting around that isn’t working for you.

The second idea is to have all your money go into one account and then give yourself a constant paycheck.  This will give you steady and consistent cash flow.  You can put your money into several different things that have a set payout at certain times, or you can just put it into a high interest checking account if you want.  These are just a couple ideas to help people compensate for differing incomes and budgeting around them.