Finance help

[Shortbread206]

Is there a good budgeting system out there that can help people who have pay checks that change. We are contractors and therefore make different amounts of money depending on the job and time of year. I find it so hard to do a budget in our situation. Any programs out there that can help?

[GeorgetteSpurling]

Yes, you need some tips to budge irregular income. Because unpredictable income makes it tough to create a budget. Take look at your first income and list all the items according to its importance, you should follow the most important thing previously.
Monthly Cash Flow Plan budget form is suitable for you.

[doingitallwrong]

You could try Mint.com, it will track all of your transactions (except cash, which you can input manually) and categorize them (you can tweak the categories to fit your needs). Once you know your inflow and output, you can set up a budget. You might also try You Need A Budget, which gets you to a "one month ahead" system where you have all of your expenses for February in the bank in January so that you don't have to worry about coming up short. (I haven't tried YNAB because I'm cheap and it's not free, but a lot of people here use it. )

[autoxer]

I find it so hard to do a budget in our situation.

I find it hard to budget even though my income is the same every week. The problem is that there's no such thing as a typical month, so my outflows are vastly different every month. One month it's a vacation, the next month it's tires for the car, then it's replacing the washing machine.

But I find that tracking how my money is spent is incredibly valuable. I started tracking everything with Mint.com. I know what my monthly averages are, so I know when I am spending more or less than 'normal', but it's not like I stop buying food when I go over my food budget. It does help make decisions, like when the food budget creeps up, I am more likely to pack my lunch. I think when I have a full years worth of data, I will make a yearly budget, so it includes all of the irregular expenses like car insurance, home maintenance, fluctuations in my utility bills... etc.

[Petunia 100]

Is there a good budgeting system out there that can help people who have pay checks that change. We are contractors and therefore make different amounts of money depending on the job and time of year. I find it so hard to do a budget in our situation. Any programs out there that can help?

Do you have a good handle on what you spend in a year? Do you have some savings?

If so, simply divide your expenses by 12. Start off the month of November with that amount in checking. Pull from savings if necessary, or transfer to savings if you have an excess. Live off of checking in November. As you receive income, deposit it into savings. Next month, rinse and repeat.

If you don't have a good handle on what you spend in a year, it is time to pull out your bank statements, credit card statements, and any other records and figure it out. You may need to fine tune as you go along, and that's fine.

[mrpaseo]

Here is what I usually tell people with flexible income to do.

Step 1: Look back at your income and write down as many as you can (Within the past 12 months).

Let's assume you receive monthly income (To make this easy). Looking back we see this:

11/13: $1,000
12/13: $1,200
1/14: $900
2/14: $950
3/14: $1,050
4/14: $1,250
5/14: $980
6/14: $740
7/14: $890
8/14: $1,000
9/14: $1,100
10/14: $1,150

You then need to average out the income: Total all income, then divide by how many periods and we will get $1,017

Step 2: Establish an income emergency fund that covers the average over the past 12 month (So in this case, $1,017). Place this emergency fund into an account that is not used for anything else.

Step 3: Have your income set up to deposit into this account.

Step 4: Set up automatic withdrawals for your average amount (In this case, $1,017) to move from your income account to your working budget account.

Step 5: Monitor your income account to ensure you never go below zero balance.

So it will work like this.

11/14: Starting balance: $1,017
12/14: Deposit of money earned: $980
12/14: New balance: $1,997
12/14: Withdrawal for your budget: $1,000 (Averaged out your income).
12/14: Ending balance: $997

1/15: Starting balance: $997
1/15: Deposit of money earned: $1,050
1/15: New balance: $2,047
1/15: Withdrawal for your budget: $1,000 (Averaged out your income).
1/15: Ending balance: $1,047

And so on. Basically it will make you have a fixed income (In this case, $1,000 per month).

You then set your budget up using the $1,000 monthly income.

A few rules:
1. Do not use this account as your emergency fund, it is only your income emergency fund to ensure you have a fixed income.

2. Do not take additional income out of the account for any reason, just stick to your plan and you will always have your set income.

3. Set an upper limit for your account. Let's say you have been doing extra work and your balance is 3 X your income. At that point, you can take out the extra money.

In this example, you will not touch any of the extra money in the income account until there is an excess of $3,000.

or

Determine an amount that you will put in per period. Let's assume you have a great month and you make $1,700... that's way over what you were putting in so set your deposit limit to $1,500. Anything you make over that amount is free money. So of the income of $1,700, you will place $1,500 into your income account and the other $200 will go into your spending money/budget.

That's about it, any questions?