Budgeting On An Inconsistent Income

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You think it’s hard to budget with a guaranteed income? Hoowee! Try doing it when you don’t know the next time you’ll get paid. I just got my first paycheck since November, but thankfully we had money set aside and Greg has been part-timing all along, keeping us afloat.
Of course we do this on purpose because we prefer the lifestyle, and I actually think it’s much easier to budget when we don’t have money consistently pouring in. We don’t take a single dollar for granted. Full disclosure: We do not file for unemployment during these times of drought- we live entirely off our savings.
Because I document everything we make, spend, save, and invest, I know exactly what we need to live. We save a year in advance, so if something were to happen to us, or if we decide we’d rather hike than work, we have at least twelve months’ current expenses at our disposal.
I cannot tell you the joy and comfort it brings me, knowing that money is rolling along, compounding interest; it makes both working and not working much more enjoyable/less stressful. Since I started taking travel contracts I may have cried a few times from hormones, but I can’t remember ever crying because I didn’t want to be there, or because I hated my job. NOT LIKE MY LAST ‘REAL’ JOB, AMIRIGHT FORMER COWORKERS? I literally cried every night I had to go to work, and often while I was there. What misery. But not since I started travel nursing, oh no, Mama is happy to work and gets as much overtime as they’ll allow.
I’ve used all kinds of budgeting strategies over the years. I’ve budgeted percentages, I’ve budgeted monthly expenses, I’ve budgeted some percentages, some monthly expenses. I stuck with Dave Ramsey’s 15% for retirement for a long time, until I realized I didn’t want to wait until we are 65 to retire.
Based on our spending last year, I had a good idea what we’d need for this year. Although with my getting a job and having to move into a ‘real’ home to survive the heat and the monsoon and the commute, our housing budget for the next 3+ months just doubled. Luckily I set aside enough in 2017 to cover all 2018’s potential expenses – housing, groceries/household items, gasoline, gift/giving, phones, auto/health/life/renters insurance, our allowances, and for the first time ever, miscellaneouses- with a bit of padding so we’ll be just fine. Weird, Merriam-Webster doesn’t think ‘miscellaneouses’ is a word. Clearly it means ‘unexpected expenses’, like bird seed and postage stamps.
We have all the money for 2018 sitting in a Capital One 360 Money Market (earning 1.6% apy at the time of writing) and only keep in checking what we need for the current month. Our direct deposits go into our Capital One 360 Checking (earning 0.2% at the time of writing), and depending on our monthly spending- whether we are over or under budget- I will either add money to our checking account to cover next month, or transfer the surplus to the Money Market to let it grow nice and fat.
I keep a ‘Financial Goals’ spreadsheet to keep track of what is going into our Money Market to cover 2019’s expenses so I’ll know exactly what we have left for 2018, and for some major motivation to extend a contract and/or work as much overtime as a hospital will allow. If we have an extra $3k at the end of any given month, I’ll transfer it to the Money Market and color in the first three blocks of ‘IRAs’ and so on and so forth. Once our IRAs are funded, I’ll move onto our HSAs, then our annual expenses, then anything leftover at the end of the year will get invested in our taxable Vanguard index funds. Check out our investment strategy to see exactly how we invest.

The sooner we fill up these up, the sooner we get to stop working for the year.

If you’re facing (or would like to face) seasonal, travel, contract, or any other kind of inconsistent income, I would strongly suggest getting an idea of what you’ve spent in certain categories over the last three months, as well as an idea for what your expenses will be going forward, and making a monthly budget based on those averages. Once you have an idea where your money is or should be going, it is so much easier to save it. I cannot stress enough the importance of controlling your money, instead of letting it control you.
The key to living on an inconsistent budget, of course, is saving, saving, saving your money. If you don’t already have enough cash stockpiled to cover next year’s expenses, you are going to need to consistently save any time you are paid. By that I mean: take out what you need for your current expenses, and deliberately set aside the rest to grow until you need to live off of it.
If you have a savings account already, great, keep it up. If you have nothing in savings let’s make that your first priority. For the first month or three, keep everything you make in your checking account and pay your bills as you normally would. Again, tracking everything you spend. When you don’t know where your money is going you might as well be lighting it on fire. When at the end of any given month you have enough in your checking account to pay all of next month’s bills it’s time to start a savings account. I do believe in Dave Ramsey’s $1000 emergency fund- you know, in case of emergencies. Not in case you need to take a vacation. After setting aside $1k, then you can either:

  1. Average your monthly spending needs between paychecks. For example, Greg and I are typically paid every Friday, so I can average out our annual spending by 52 weeks. We saved $26,000 for 2018’s expenses which comes out to just $500/week. Everything you make over the amount you need for that pay period can be transferred to a savings account.
  2. Average your monthly spending by month. $26,000/12 months = $2166.67/month. At the end of any given month, leave the amount for next month in your checking account and transfer the rest to savings.

A great way to pad your savings when you’re not working all the time is to get a few side hustles. The internet is full of ways to make extra income, just Bing it. We like to actually enjoy our time off, so we only dabble in the most passive side hustles, our favorite is giving plasma. We’ve already made nearly $1400 this year giving ours.
Of course budgeting on an inconsistent income is much, much easier if you don’t have any debt. If you have student loans, or a mortgage, or credit card debt I would say (unless you have no other choice) make getting out of debt your priority before you jump into inconsistent employment. For example, travel nursing is extremely lucrative, but it’s not guaranteed income. I could extend my current contract another three months, or I could be traveling/moving out of state to find another one. Remember: Income may come and go, but bills never stop. Get rid of them.

Here’s a spreadsheet I made for tracking our expenses in 2018. To convert these Excel sheets to Google Drive, go to your Drive homepage and click NEW, then Google Sheet. On that sheet go to File and click Import, then Upload, then select the file in your downloads.
Monthly Budget & Expenses

Watching the sunset from the Big Island. We budget to live the life we choose.

Do you live on an inconsistent income? How do you ensure you’ll always have enough money to cover your expenses?

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