Newbie here with Budgeting Question

[Maxoman]

Hi All!! Nice to meet ya! I have been living paycheck to paycheck for a while now, and am sick, sick, sick of it. I am already a frugal person, and DO NOT spend money like its water. I believe my problem stems from not having a proper budget. Sure, I always have one in my head (like...only buy one gallon of milk because payday isn't for another 3 days)but I realize that I need to get one down on paper and FOLLOW it. So this is what I have dedicated myself to the last few days. I signed up at mint dot com and have been trying get everything down pat. My question is how would you guys budget your paychecks? In other words, my DH makes some overtime and such during busy times of the year, but other times only makes base pay. I took his yearly pay from last year and divided it by 12 to get a monthly amount. Is that correct? My worry is some months might be a little short if it is during his slow period. I have a feeling you guys are going to tell me to base my budget off his base pay and take his overtime when it happens and sock it in the bank. I agree, but I also have a mortgage, 2 kids, a car, etc. etc. and I'm not sure... Thanks for your help. I have been a lurker here, but I need financial support and I'm ready to "show my face"!

[disneysteve]

I have a feeling you guys are going to tell me to base my budget off his base pay and take his overtime when it happens and sock it in the bank.

Yep. Pretty much. You must base your budget off the income you are sure you will be getting. You can't count on money that may or may not come in.

So from the base pay, shoot for 50% for needs, 30% for wants and 20% for savings. When extra money comes in from overtime or other things, you can make extra debt payments or beef up the savings or even splurge on a little treat from time to time.

[Emerald]

I get paid biweekly, so I get 26 checks a year. I budget base pay for 24 checks only. Then all the OT/holiday/night & Sunday differential money is savings. The 2 extra checks are Christmas and vacation money, respectively.

I also have 8 months of base pay in an emergency fund.

It's conservative, but I like playing safe.

[Nightfly]

Everyone's income varies to some degree, at least a little over the course of a year. So, a person who gets paid bi-weekly can count on an two "extra" checks twice per year. You might want to create categories in your budget that are "nice to have" items - somewhere between basic needs and unnecessary luxuries - and set some of the "bonus" money aside for these types of things. In other words: things that you don't need today but would like to have a year from now. And then direct some of your DH's bonus money towards these types of items, by using an online savings account that you only touch for your designated future wants/needs.

[YLTL_Dan]

Yep. Pretty much. You must base your budget off the income you are sure you will be getting. You can't count on money that may or may not come in.

So from the base pay, shoot for 50% for needs, 30% for wants and 20% for savings. When extra money comes in from overtime or other things, you can make extra debt payments or beef up the savings or even splurge on a little treat from time to time.

As usual, I totally agree with DisneySteve. If you need some additional help/tools for getting control of your money, check out my blog. The tenets of this plan are built on the foundation of the Dave Ramsey plan (which I highly recommend) but has some nuances you might like. Hope you find success in your new year!


Follow these steps to Nurture your Money Tree
1. Complete a current assessment
2. Track your spending
3. Create a spending plan
4. Monitor plan and adjust as necessary
5. Save some money
6. Attack your debt
7. What's next?

[Maxoman]

Thank you very much for your replies. I am grateful for a place where I can come and "put it all out there" and have no judgement, just help and support.

I think it will be difficult to budget only on base-pay, but also necessary. We can do it, but it will be tight. I have a feeling once I get a few months under my belt of truly following the budget, it will get easier. Please tell me it will get easier!lol

My next question is about cash flow. Since I am starting behind on a few bills, my cash flow is upside down and I'm nervous about getting it going in the right direction. Anyone have any good advice besides suck it up and pay the bills?lol DH gets paid bi-weekly, and I seem to always be waiting until that next paycheck to just catch up on late bills. I like the idea of budgeting on 24 instead of 26 paychecks. That might help me get rightside-up again. I have to look at a calendar and figure when the 1st "extra" check is.

I'll take a look at that blog. Thanks again!

[disneysteve]

Pick up a copy of Dave Ramsey's The Total Money Makeover. Part of his budgeting plan deals with folks who earn an irregular income which you may find particularly helpful.

It also sounds, quite frankly, like you need to either cut your spending more or find a way to boost income. Do either of you work second jobs?

If you are willing, post your income and expenses here for more detailed advice.

[maat55]

I personally, would write down a bare necessity/tight (house payment,cheap foods, utilities,auto expenses etc.) budget.

The idea is to find margin between your income and expenses. If you cannot find margin after a tight budget, you are living beyond your means. You may need to eliminate cable, cells, internet and other luxuries. The more determined you are and willing to sacrifice, the faster you will reach your goals.

If you do find margin, you should first establish a 1k emergency fund, then start paying off any consumer debts. Once they are gone, you move to beefing up your emergency fund. The emergency fund should only be used for emergencies and not used for making up bills during lower pay periods. You should establish a separate fund for this purpose.

Once you are debtfree and have an 3 to 6 months EF and have began to put at least 10% of your income towards retirement, then you can decide how to use your margin, whether for increasing lifestyle or establishing a consumption fund for cars etc.

Basically, you need to create a priority list of financial goals and meet them in order. Some can be divided, but you should not do some before others, like college savings before retirement savings, you should not do serious retirement savings before fully funding your emergency fund.

My .02 cents. Good luck.

[Maxoman]

I don't think I am comfortable enough yet to post all my dirty laundry, eh, income, here yet!lol I'm sure I will get there.

Yes, we certainly need more income. But we made a life choice when we had kids that I would stay home with them. It is more important that we raise our children, not a day care (absolutely, positively not knocking those who have kids in daycare. It is a personal choice). Now that the kids are a bit older (8 year old twins) I have been working more while they are in school. I never turn down a job (i am a freelance horse trainer). Once I feel comfortable that they can get off the bus by themselves and not burn the house down I will take on more hours. As it is, for what I would be making it doens't pay. I would be working to pay a sitter/after school care.

Most of, if not all, our financial woes started with a failed business and *&^%&* laywers. We are lucky we kept our house.

Our motto was always "you can make up money but you can't make up time". Easier said than done. Now that we are trying to "make up money" it seems quite daunting. Sigh....

[skydivingchic]

One of the best things I've done for myself financially is save up one month's worth of expenses so that I stopped living paycheck to paycheck. Now on the first of each month I have enough money sitting in my checking account to fund all my spending envelopes for the entire month in full. That means the paychecks I earn in January just sit in my account until February 1, when I fund all expenses for the month of February. It took me ~4 months to save that up. This is in addition to and completely seperate from my emergency fund. This method smooths out cashflow tremendously. It no longer matters what day a bill is due versus what day I get paid - the money is already set aside. It also allows me time to deal with any little things that pop up during the month whether that be a late paycheck or an unexpected expense. I would recommend you make this a goal.