This is part of our Financial Literacy Month Question and Answer series

Question: How do I go about creating a budget for my family on a straight commission job? What figures do I base it on. Thanks. Todd

Answer: Hi Todd, that’s a great question. I call that “Roller Coaster Income”. Realtors, doctors, sales people and self-employed or small business owners often run into this situation.

Most people with Roller Coaster Income spend the money or pay off old bills when they have high income and starve when there isn’t much coming in.

A better way to do this (not necessarily the easiest!) is to create a monthly spending plan based on the lowest, most likely income and the highest expenses. If you still have money left over, you know that you will be able to weather any storm.

In the months that you make more money than the minimum, set it aside the “extra” in a savings account for when you make less than you need. This account will also serve you when you have “emergencies” like car and home repairs, medical bills, etc.

If your expenses are less than the worst case scenario, you will have some extra money to set aside as well.

As your savings account grows, you can “pay” yourself more. When you are on straight commission, or self-employed it is like being in business for yourself. Take good care of your employees (that means you)!

Hope this helps!

Warmly, Cindy