A great household budget: How to manage your costs on a fickle income

Most of the people don’t love budgeting. But, it is a necessary evil nevertheless. The result of lack of a budget though universally known, yet a lot of times the urge to splurge gets the better of a shopper who ends up buying more than what he or she had actually intended to.

This won’t be too much of a problem for an affluent person or one who knows when to scale down his or her costs. But what if a person with a fickle income (fickle here means irregular income) leads a lavish lifestyle? Does no budgeting or lacks the skills to do so? The problem could be many, but the most prominent one and probably the fastest would be bankruptcy.

So, if you’re a person with fickle income with no scheduled paycheck to receive each month, then you’d agree that both budgeting as well as planning is tricky. To ease that burden off your shoulders, here’s what you may do.

The game plan to manage your budget with fickle income

Following financial strategies would always keep your household budget running in clockwork precision:

• Estimate the amount of your budget - When planning your household budget, it is important to find out the amount you’ll be able to allocate out of your current income for the same. Estimate the amount of money you’ll be able to set aside for yourself at regular intervals. For this you’d need to have a sound understanding of the ways to derive the necessary amount you’d want to allocate as your budget on a year-to-year basis.
  In doing so, you’ll successfully have your income spread out. This will in turn help you to estimate your yearly income and then distribute that amount as per the number of pay periods you are likely to have. Once you’re done with that, you’ll have a definite amount of your income to work out a great monthly budget.
  Depending upon your pay periods (like weekly, biweekly or monthly), you can divide your overall yearly income by 12. Each of these amounts must be used for monthly transfers and should be considered as your monthly revenue.
• Open two separate bank accounts - As far as two separate bank accounts are concerned, then they can either be opened in the same bank or in different ones. If you’re a tech-savvy person, then you can opt for an online account. The reason is you could easily open sub-accounts, if you want through it.
  Let all your irregular payouts be dropped into a single bank account. Such an account is known as a deposit account. After that, create a schedule to transfer your weekly, biweekly or monthly payments from your deposit account into the main spending one.
  You can make all the external payments through a funnel into a single bank account. This will smoothen the process of fund transfers into your spending account and use it to pay for your daily costs. Primarily, both such accounts are usually checking accounts. This is because you are most likely to make multiple payments.
• Make wise use of surplus - In the event of an excessive income left with you, then you may use a part of it as savings contribution for the immediate next year. These savings contributions will be a sort of buffer stock (emergency fund) that would help into offset the negative impact caused by a financial crisis or any kind of future deficits.
  However, its absolutely fine to consider the remaining excess amount as windfall. Remember to make your hay while the sun shines. So, your goal would be to straighten up your finances so as to boost your monthly household budget before your streams of income dries up.
• Take cover against uncertain income - If you belong to the group which earns on a weekly or biweekly basis, then you’re fortunate enough to receive your pay as per a proper set up. This type of pay is usually found in commission-based jobs. One of the most obvious features of these jobs are that their lean periods happen to be during the start of a new year, but then the revenues starts to trickle in once the year moves on and the period of sales cycle reaches a booming phase.
  However, in such a kind of job, you may lose all your money kept at a deposit account prematurely. So, if you identify yourself in a similar kind of situation, then you may have to borrow out of your savings fund to cover your costs as well as other transfers, especially during the former months of a brand new year.

Last but not the least, do not forget about planning for your golden days. Its important that you continue making your contributions towards your retirement accounts, be they employer-sponsored ones or self-financed, or Individual Retirement Account (IRA) or 401(k). There are many employers who even now offer their commission-based employees with an added perk of a 401(k) plan. However, if you prefer to work on your own or are employed on a part-time basis, then the onus lies on you to contribute towards your retirement plans and build up your nest egg on a monthly basis.

On the other hand, if you choose to ignore these advises, then your ignorance will definitely hurt your own future and that of your children and other dependents. So, make it a point to make your contributions an integral part of your budget. Apart from that, you need to ensure that you’re adequately insured with coverages like health, disability, car, homeowners, etc and keep them labelled under the non-discretionary costs of your budget.