Where To Start

[Stump1000]

I've been reading the site for a few days and finally decided to join up and make my first post. There's a lot of information here and I'm loving it so far.

My situation is sort of a unique one, I think. I'm self employed so my income isn't the from week to week or month to month. That makes budgeting almost impossible for me. This winter has been really slow for me, and my income has been around $1500 a month. Last Summer, I was making about $15k per month for about 3 months in a row. Sadly, I blew it and it's gone. Some of it was well spent but it bothers me to think what I could have done with that money... that's the reason I'm here. My wifes pay is steady though, and she brings in $590 a week.

I have $100 in my EF which is my only savings at this time. I have a lot of bills to, which I can list out if needed. My question is, how do I go about budgeting and splitting the money up between debt and EF and other savings?

[creditcardfree]

I would suggest you prioritize your bills and expenses by month. Obviously, food, lights, shelter would come first. The first money to come in needs to pay these, or be set aside to pay the groceries. As the money comes in, allocate it to the next priority on the list.

If you don't have an emergency fund, I would highly suggest getting $1K saved as soon as you can. After you have that start paying debts off.

[maat55]

As mentioned above, you need to prioritize your spending from necessities to luxuries. I would personally look around and sell everything you do not need in order to build an small emergency/cushion in your primary bills account.

This makes it easier to pay monthly bills while waiting for income to come in. You will also need to sit down and figure your realistic yearly income and divide it into 12 months. Due to your income being irregular, you will want to set aside enough to ride out about three months when you have good months.

Due to the uncertainty of the economy, building emergency funds to pay future necessities is more important than paying down debt first.

You should sit down together and make a strict necessity budget to start. List your necessary expenses from most important to least. Housing, utilities, auto gas etc. Find everything you can eliminate in the shorterm in order to build sufficient savings for shorterm(3 months) expenses.

Once you have secured your monthly expenses, you can look to paying down debt.This can be done in two ways, lowest debt to largest attacking the smallest with all extra funds, pay it off and move to the next or paying highest interest to lowest, doing the same snowball.

The key is to cushion your account as soon as possible. Having an irregular income means you have to set aside enough to ride the lows. You should never assume that having goods months means you have extra funds for discretionary spending. Eventually, you will want to have 8 months expenses before you begin to spend for luxuries. It is difficult to win with money when you are not disciplined to your priorities first.

[disneysteve]

There are ways to budget an irregular income. You have the benefit of having dual incomes, only one of which is irregular, so that helps a lot. The two of you need to sit down and list every monthly bill and expense that you need to pay. As suggested, put that list in order of priority - food, shelter, utilities, etc. on down the line. Starting with the fixed part of your income - your wife's salary - start at the top of the list and cover what you can. Then move on to your income and work your way down the list. If there are more items than there is money, the things near the bottom may not get paid that month. Obviously, your goal is to pay everything while also building a reserve to cover you for months when your income is reduced.

Start by trimming as many costs as you can until you've got that reserve built up. If you'd like, post your expenses for us to review and we can suggest places to trim and cut back.

[snafu]

You've been given great, practical, doable advice. Getting out of debt requires a change in thinking and a change in priorities. You need to know where your money goes and how much just dribbles away. You both need to focus on 'needs' and drop the 'wants' for the time being. The 1st step is to get your wife on the reduce debt bandwagon.

You may need to change your cell plans to basic or prepaid service for example. Eating out/take out costs nearly double the cost of preparing meals and snacks at home plus you eat healthier without all the chemicals in convenience foods. Take your double double from home in a travel cup instead of expensive SBUX. If you are paying for a service you're not using - like gym - drop it until you're more stable financially.

Temporarily change your cable/internet plan to basic. Plan errands/driving to minimize expenditures. These are sound like 2 bit reductions but they add up. Post your expenses and let us know each time you eliminate a creditor so we can cheer on your efforts.

[cschin4]

Keep it simple. At this point, you don't need to worry about splitting it up, etc. You need some emergency savings and debt payment. Get your debts paid but you still need something to fall back on.
As for your situation being "unique", it isn't. Lots of people work on commission. The real issue is budgeting to the lowest denominator and not get lured in by good months. That's all.

[littleroc02us]

I would track your monthly incomes for the past 12 months and then set aside the necessary funds to cover expenses during the down times. IMO, you should beef up your EF to 12 months of expenses for someone like you who has variable income.

[DebbieL]

It sounds like the $15K months were not typical for you. What would be a more "typical" month, or a "worst case" type month for you? I would figure that out, and set my budget to that amount (plus what your wife brings in). I would make sure to build savings into that (lower) amount too. That way, any time you have a good month it is just extra savings (maybe a small splurge too). Good luck, and feel free to post with more details if you want more suggestions.

I totally agree with others that when you have such an uncertain/unpredictable income you need a much larger emergency fund in place. Aim for at least 6 months of "trimmed down" living expenses. What I mean by that, is that when I'm deciding on a figure for my emergency fund, I don't make my monthly expenses as high as they are when I'm working. There are certain things that I won't be doing if I have no income coming in such as eating out, buying new clothes, driving as far, etc.

[Stump1000]

Thanks for all the replies. I definitely need the guidance.

I've wrote down all my bills, but I haven't wrote down all of my expenses yet.

15k is definitely not typical income for me. About $1500 a month is as bad as it gets. I guess I should base my budget from that plus my wifes income.

I opened an online savings account with Ally. I'm going to start an automatic transfer to that account. I'll post my expenses when I get them together.

[Stump1000]

Hey everyone, I'm so glad I came to this site a while back. You all gave great advice and it's definitely helped out a lot.

I have 1k put up in my filing cabinet, kinda hid in there. That's my EF.

I have 6k in my savings account. I set up an automatic deduction from my checking account every week. That's $250 a week added to savings.

I probably should have done better from March until now, but the first month or so I guess I had to think it over. I didn't start doing real good with it until the last 3 months.

I was also able to sell my 2009 Nissan Titan so now it's paid off. That's almost $600 a month payment that I don't have now not including the insurance, which was pretty high.

Thanks for the advice, wouldn't have ever got this far without you.

[disneysteve]

That's great Stump1000. Thanks for the update. So many people come asking for advice and we all give it and then never hear from them again. We don't know if they followed the advice, if it worked or if they are now living in their car under the highway overpass. Glad things have worked out for you.

[Dseals]

This post is awesome..i've been reading tons of crap posts from other blogs, but shows you have a more educated reader base.

[Dseals]

The post is absolutely fantastic! Lots of great information and inspiration, both of which we all need!b Keep 'em coming... you all do such a great job at such Concepts... can't tell you how much I, for one appreciate all you do!

[kamilopolo]

@Dseals Agree with you.