Budgeting With Income Fluctuations

[amastewa93]

My other half has been out of work since early June and we were scraping by the past two months or so after our emergency savings was drained. GREAT NEWS - he started a new job this week, which will help with the stress of finances, for sure. But I have a few things mulling around that I'd like some of your thoughts on.

1. We can survive on my salary alone (albeit barely). Should we use his salary to pad savings and pay off debts faster?
2. His new job pays really well but there's no absolute guarantee. He's a mechanic and will get 30% of each bill he works on. When all is said and done, he'll be making about $26 per hour. However, if the shop is slow, he won't have work or a check. This in itself makes me a bit nervous because we don't know anything about the general workload at the new place. They've said he will likely turn 40 hours a week without a problem and yesterday (his first day) he did keep up with that. Does anyone have any tips on how to budget with a fluctuating income like that?

TIA for your thoughts!

[disneysteve]

Your budget needs to be based on the minimum expected income. In this case, that would be your income if theoretically he could earn $0 (although I'm sure that's highly unlikely) and you make enough to cover things. So necessities first: food, housing, transportation, medical care, etc. With his income, first priority should be rebuilding the EF to at least a couple thousand (or $1,000 if you want to follow the Dave Ramsey plan). After that, start attacking the debt. As you posted in the "Wins" thread, you just paid off one debt and that lowered your monthly bills by $320 which is terrific. Each time you pay off a debt, you give yourself more breathing room in your budget (and less money stress). You could also split the money and have a small amount going to further build the savings while the bulk of it goes to the debt.

[disneysteve]

Once he's been at the job for a while, you should be able to get an idea what his "base" income will be and you can adjust your budget accordingly.

[kork13]

Steve has it on the nose. Figure out the worst case scenario for how much you all earn each month, and plan your baseline budget off of that. The baseline budget should cover your essentials (food, housing, utilities, transportation, etc.), then whatever else is highest priority. As you both earn more, you can use that money for extras, again in order of priority. The trick to a variable income is to plan for the worst, then prioritize all of your expenses to cover what is most important (in order, from most important to least).

[amastewa93]

Thank you both! That definitely makes sense. I'm excited about getting some more of our stuff paid off and have a little more breathing room. The past five months or so has been pretty rough. We should be able to have $1K in our EF again by November 15 (the end of November at the latest) and then we will start paying more stuff off. The $320 freed up from our recent payoff is going to go towards paying his car off quicker (we only owe another $700 on that). I'm excited to be getting back on top of things, for sure.

Next move will be finding a place that's a bit cheaper to rent so we can pay things off more quickly and save for a DP on a home! (We are paying $1,400 in rent )

[ronb]

you guys should probably also try to increase your income...like get a side hustle or somethin

[scfr]

I mostly agree with what others have said.
My recommendation is to set your budget so that you can meet all your needs (basic living expenses AND MINIMUM DEBT PAYMENTS) on your income alone.
Then I'd come up with a plan in advance for how you will allocate your SO's income: What percentage to extra debt payment? What percentage to beefing up the EF? What percentage to wants? Once all debt is paid off and the EF is at an acceptable level, you can decide how much you want to allocate to savings for a home, more for wants, etc.

Continue to re-evaluate what you consider a need and what you consider a want. I believe many of us classify things as "needs" that really are "wants."
One benefit of living a frugal life is that I have learned to milk maximum joy and fulfillment from minimum $.
Don't worry if you don't get all this stuff figured out perfectly right away.
It's a process.

[amastewa93]

It's a process.

It definitely is! Two years ago at this time we were living in a motel (homeless) and unable to get into an apartment because of some not-so-great choices I made about roommates in college. I was making about half of what I do now and he was making a fraction of what he is at the new job. So, we've definitely come a long way. I'm definitely excited to be debt free - I know that will help the rest come together.

Currently, we are going to use the month of November to get caught up where we've fallen behind and get $1K into the EF. Right now, our major bills are...

Rent (water, sewer, trash, Wifi included): Around $1,400 a month, depending on water usage
Two car payments (one will be paid off soon): $644
Car insurance (full coverage and we are both under 30, so this may go down soon-ish): $220
Student loan payment (mine): $279
Phone bill for two unlimited data plans (I write off a portion of this for work): $230
Repayment on my computer: $106
Electric: Usually around $100 or less
Vet bill (we hold insurance on our dog): $48
Tool repayment (for the other half): $330
Groceries: About $95 every two weeks
Dog food: $27 monthly

Current CC debt: $2,500 collectively

With how his week is currently going, we should be making about $7,600 per month collectively if business there stays the same - which it should. So, I'm feeling optimistic. It has been a LONG time since we had two incomes. Being able to save and pay things off will be GREAT.

[disneysteve]

It sounds like you've made a lot of progress in a short time, Amanda. That's great.

Getting rid of one car payment soon will be nice and help out for sure.
It's a good idea to reshop the car insurance annually. As long as you both have clean records, you may be able to find cheaper coverage. It never hurts to check.
You're only spending $50/week to feed 2 people? That's impressive. I bet a lot of others could benefit from hearing details about that if you started a thread on that topic.

Glad to hear his new job is going well so far.

[amastewa93]

Getting rid of one car payment soon will be nice and help out for sure.
It's a good idea to reshop the car insurance annually. As long as you both have clean records, you may be able to find cheaper coverage. It never hurts to check.
You're only spending $50/week to feed 2 people? That's impressive. I bet a lot of others could benefit from hearing details about that if you started a thread on that topic.

Yes! Getting rid of one payment will definitely help out. I'll consider shopping around for insurance, for sure. We just signed another 6-month agreement with who we have but will be able to revisit it in the spring. We've both got relatively clean records - he got a speeding ticket 2.5 years ago but no points were added to his license or anything. I also just turned 25 this year so we may be able to pay a bit less soon anyway.

And yes! We wind up eating a lot of the same stuff but it keeps our grocery bill super low - I'll add that to a separate thread though

[snafu]

amastewa, pretty impressed by your progress. Since savings is an important goal, with rates are moving up, I hope you'll watch for the best rate being offered for electronic savings account. When I made it a point to track every dollar spent, I was shocked to discover how many $$$ trickled out un-noticed for ....bank charges, late charges, CC interest [transfer to 0% if you can make the time frame]. Transportation Categories like fee charged for monthly auto insurance payment as opposed to annual or bi-annual, insurance and deductible appropriate to the value of vehicles, using 'Gas Buddy' on regular route for cheaper gas and awareness/avoiding/holidays when rates zoom for no reason. We'd generally took lunch from home but we spent dollars necessarily on coffee, snacks, socializing with work colleagues at a pub. It turned out to be a lot more fun to go to the gym.

Moving is expensive, suggest adding 'Moving' as a line item on savings to cover fees from all the utility suppliers and packing supplies. BTW, do you have renter's insurance? Budget for spending Thanksgiving, Christmas, New Year, Valentines?

I totally understand your desire to pay off the car, your enthusiasm jumps right off the page ! Have you and partner created a list of pay-off order? Some use lowest to highest balance, other's by highest to lowest interest rates.

[amastewa93]

amastewa, pretty impressed by your progress. Since savings is an important goal, with rates are moving up, I hope you'll watch for the best rate being offered for electronic savings account. When I made it a point to track every dollar spent, I was shocked to discover how many $$$ trickled out un-noticed for ....bank charges, late charges, CC interest [transfer to 0% if you can make the time frame]. Transportation Categories like fee charged for monthly auto insurance payment as opposed to annual or bi-annual, insurance and deductible appropriate to the value of vehicles, using 'Gas Buddy' on regular route for cheaper gas and awareness/avoiding/holidays when rates zoom for no reason. We'd generally took lunch from home but we spent dollars necessarily on coffee, snacks, socializing with work colleagues at a pub. It turned out to be a lot more fun to go to the gym.

Moving is expensive, suggest adding 'Moving' as a line item on savings to cover fees from all the utility suppliers and packing supplies. BTW, do you have renter's insurance? Budget for spending Thanksgiving, Christmas, New Year, Valentines?

I totally understand your desire to pay off the car, your enthusiasm jumps right off the page ! Have you and partner created a list of pay-off order? Some use lowest to highest balance, other's by highest to lowest interest rates.

First, thank you! I am definitely excited about getting back on track. I'm hoping to put our savings into a joint credit union account we recently opened. I've been with Coastal Federal Credit Union since I was 7 (I saved $25 to open my first savings account at that time and was SO excited). Their interest rates are good but I'm definitely going to be shopping around. They have no additional banking charges unless it is a money market account as far as I know

We are currently getting gas at Costco - it saves us about $0.30 a gallon! We've been spending about $20 a week on gas (though we may need to adjust that with him working again).

Food wise - I drink black coffee at home (purchased every six weeks or so at Costco for $8.99). We try to also make all of our snacks here (I've chatted about that in a separate thread). We have also decided to stay out of the bars and restaurants for a while. When we want to socialize we go to friends' homes or they come here and we'll buy either some wine or affordable liquor, that is pretty seldom. I'm thankfully also able to use the gym at my apartment complex (which I use daily).

We DO have renter's insurance - I just always forget about it because it automatically drafts haha. It is $13 and some change each month.

Holidays - I believe we are doing Thanksgiving here at home. We've adjusted the grocery budget for the middle of November to be about $25 more for that meal (about what it cost us last year). For Christmas, the family has decided to "adopt a child" and chip in things. Outside of that, we have two things we'd like to get each other - we both want to learn German so we are going to get Rosetta Stone. We also both want an ancestry test. The rest of the family gets homemade cookies and goodies from us each year, which cost very little (maybe $50 in total). We will also do a Christmas card with a photo, as usual, which doesn't wind up costing much either. But we've planned for that a bit. We don't do anything for New Year's and we sometimes celebrate Valentine's but in a very scaled-down sense. I think last year I got a new mug and book (perfect gift for me), and he got a new tool of some sort he needed for work .

Right now - we have a "priority list" and they are basically in highest to lowest interest rate order. Our CC debt will be the first thing to go, then his car, then my computer, and his tools. After those things are paid off, we will be making my car and student loan the next priority. Once we get the other items paid off, we should be able to make much larger payments towards those two things.

[disneysteve]

I'll consider shopping around for insurance, for sure. We just signed another 6-month agreement with who we have but will be able to revisit it in the spring. We've both got relatively clean records - he got a speeding ticket 2.5 years ago but no points were added to his license or anything. I also just turned 25 this year so we may be able to pay a bit less soon anyway.

Keep in mind that the "6-month agreement" doesn't really mean anything. If you decide to switch companies tomorrow, your current company will give you a prorated refund. So you don't have to wait 6 months to shop around if you don't want to. It's also easy to get free quotes online with no commitment.

[amastewa93]

Keep in mind that the "6-month agreement" doesn't really mean anything. If you decide to switch companies tomorrow, your current company will give you a prorated refund. So you don't have to wait 6 months to shop around if you don't want to. It's also easy to get free quotes online with no commitment.

I will definitely keep that in mind! Our current insurance guy really wants to keep us so he is also poking around to see what kind of additional discounts we can manage. I am going to compare it with the quotes I get online and see.

[disneysteve]

Our current insurance guy really wants to keep us

Could there possibly be a bigger red flag than this? Of course he wants to keep you. You're paying his salary.

There is no reason today to deal with an agent for your insurance. Anytime you get a commissioned sales person involved in a transaction, you're almost guaranteed to pay more than you need to.

I'd recommend getting some online quotes and comparing. Let us know what you find.