Budgeting With an Uneven Paycheck
Some people get a set paycheck every month, but for many people this is not the case. What do you do if your paycheck fluctuates? How can you budget if your paycheck depend on your hours, your overtime or your commission? How do you create a budget when your income changes all the time?
The most important thing is to plan. Make sure that you are making smart choices with your money. The months, in which you make more, you need to set aside more for those lean months. When you receive a large paycheck you can’t just go and spend it. You need to factor in how you will pay for all your expenses in months with small or no paychecks.
- Add up all your monthly bills. Round up.
- When you get your paycheck immediately deduct 10% for maser and put it in your maser account.
- Deduct 15% (or 30% or 50%!) for savings. Put this in whatever step you are up to in your savings ladder.
- Deduct your bills from the amount left and place that in your bills account. If you sometimes don’t make enough to pay bills, then on the months that you do, you need to put at least twice in your bills account. Make sure that you always have a full month’s bills amount in your bill account. When you have a month with a smaller paycheck, you pay what you can and you take from your bills account to pay the rest. If you really are on a live large or die income (some months you make tons but some months you make none) you should make sure that you have living expenses for 2-3 months put aside to cover those lean months (separate from your emergency fund- and you should do this first-before any other savings). You should calculate that every paycheck needs to cover two months of expenses (or more depending on how much your income fluctuates). It will take a lot of self-control and planning but it can be done!
- Decide on a percentage for all variable categories (clothes, spurge, coming soon etc.). Example, 10% for each. Multiply your paycheck amount by 10% and place those amounts in your dedicated “envelopes” or accounts”. You should set a ceiling amount for each of these categories. Once you reach that ceiling you take the “leftover” amount and place it in savings. That way you can take advantage of particularly large paychecks.
- The amount left over is for food and discretionary spending. If this amount is too small than lower your contribution to your other variable categories.
The easiest way to calculate where everything goes is to use an Excel spreadsheet. Simply set it up with your desired percentages and your total bill amount, and then every month put your paycheck amount in and Viola! Each amount is calculated for you. I have attached a sample excel spreadsheet here. Play around with it and work out which numbers work best for you! The best part of this system is that can be constantly adjusted to keep up with your income and needs.
Download Sample Budget Spreadsheet.