Roller Coaster Income?
April 14, 2008
If you're new here, I invite you to subscribe to my RSS feed. Thanks for visiting!
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
Similar Posts
- Separate Accounts for Business and Personal Expenses
- Simple Savings Tip #1: Change Billing Date
- Create your own Anti-Emergency Fund
- Emergencies!
- More Travel Expenses Tax Tips
Comments
One Response to “Roller Coaster Income?”
Got something to say?
[...] you have uneven income, you might want to read my “Roller Coaster Income?” [...]