All over the world, there are people just like us who have a different income one month to the next. The self employed, sales people, people who have on target earnings, people working on zero hours contracts, and month to month, there are good times and bad times. So, how do we budget for that?
You may have set up your own business, you may have had to take any job, even if it’s insecure, just because that’s all there was at the time.
I’ll give you the scenario first.
Each month, we do our work and we invoice for that. We get the money in the next month.
We earn money in January, we get that money into our accounts in February and we have to live off that money, and save what we can in March.
Also, we only get paid when we work so if we are sick or take time off, then we have no income. We do get sick and we do take time off so we have to build that in.
Anyone running a business where you invoice, get paid later, then work out what’s yours after taxes and social charges will understand that.
There’s plenty of advice out there such as living on an average. However, on a lean month, we’re way below average so we can’t spend what we don’t have.
Here’s how cope.
Know your barebones budget
Every month, there’s a bare bones budget and we know, if that’s all we have, that we can at least live.
Our bare bones budget are our absolute essentials: food, fuel for the car, utilities, insurances, water, gas, the minimum amount we have to save each month and that’s the basis of our budget. Some months, that’s all there is and we make it work.
Know your annual big bills
We’ve calculated annually what we need for the annual bills such as local taxes, the TV licence, the refuse collection, the water bill, the wood bill and then we’ve divided that into 12 and that becomes part of the bare bones budget as these are non-negotiable. So are birthdays and Christmas for family members and that budget is totalled as an annual bill then divided into 12 and part of our monthly non-negotiable expenses. These can really catch people out if they are not ready for them, they are not a surprise and happen every year. The other bill is car maintenance, new tyres and repairs. We looked at the most expensive year and then divided that by 12 and know that’s a non-negotiable too.
We have no spend months and no spend weeks
January, July and October have been our biggest earning months so we purposefully save as much as we can in those months. Those go to big repairs, big replacements or big maintenance projects. We then try to have a week a month where we don’t spend on anything, not even food.
We buy a little for the Christmas pantry each month
It’s never too early to start a Christmas pantry, so far I’ve bought dark brown sugar, ginger and spices. These will go away in a dark cupboard. In the autumn, I will buy and free a ham joint and each month a beef joint or a turkey. When I get to Christmas, all my big expensive food items will be paid for over the months.
We stock up on pantry staples
There are items that we can all buy when we have a little extra, tinned foods especially proteins like tinned meat and fish that can be the basis of meals when we have a lean month. Dried pulse and pasta are also great. We have a deep freeze and on a very good month, we buy as much as we can to freeze to keep us going. We can freeze bread. We make jam so I buy an extra bag of preserving sugar in the good months to use in jam making season. I also buy dried fruit and tinned fruit to add to the pantry to keep us going at other times.
We have a zero balance budget
Every euro is accounted for each month and we know what we have to spend. The top figure is always savings even on the bare bones month, even if it’s just 10% of income, then we save. This means, we are well used to counting all the pennies even on a good month.
We have sinking funds
We know we have annual bills and they need saving for so we put money aside each month as part of our bare bones budget. We know we have to pay for the wood, the council tax and the water and those bills are not monthly but there’s a fund for those. We know we’ll need clothes, shoes and personal items such a new technology that we use in our jobs. All those have to be saved for.
We have an emergency fund
We were not always savers and now that we are, we treat a certain amount of money in our account as our zero, anything below that is not to be touched unless there is a genuine emergency. It will stay there.
We save until we have it
We never just spend money when we have it because it’s there and we can. Each month, money is put aside for later and if we need it, then we add what we have saved to a month’s budget. In the better months, we save more. In lean months, we save less.
How do we cope with Murphy?
Murphy’s law is that if it can go wrong then it will go wrong. What ever you have can and will break, fail, need replacing and will do so in your worst month. We try to buy the very best quality we can afford at the time and make it last. We also keep money in sinking funds for things that can and will go wrong. We know things will break or need repairing so we budget for that and then, if Murphy comes knocking on our door in a lean month, we’ve put the money aside in the good months.
Our fluctuating income does make budgeting difficult. Having a budget does make life difficult and easy at the same time. It’s difficult as we literally can only do what we have budgeted for and there isn’t money for anything else. It makes it easy as we know what we have to spend and that takes away the worry of how much we have for this, that or the other.
What about you? How do you cope with an inconsistent income? How do you manage the months with less money? What do you do in the months where you earn more?
Thanks for reading, I always answer your comments and love to hear from you so leave a comment below.
This article was originally published in Frugal Queen in France.