Budgeting with an unpredictable income

[Toniixo]

As the title says, how do I budget effectively when the household income varies considerably month to month?

One month we could have £1200 come in, the next we could be down to £600 / £700. It's getting difficult to be able to always pay bills on time. I have a terrible credit score, so am unable to get an overdraft, and have many debts, which we are struggling to pay. We are on a very low income, and have so many outgoings

Any hints or tips would be wonderful!

[97guns]

save when you can, from your numbers a £600 nest egg would cover any short month, no outings or fun until $600 is saved

[Nutria]

As the title says, how do I budget effectively when the household income varies considerably month to month?

One month we could have £1200 come in, the next we could be down to £600 / £700. It's getting difficult to be able to always pay bills on time. I have a terrible credit score, so am unable to get an overdraft, and have many debts, which we are struggling to pay. We are on a very low income, and have so many outgoings

Any hints or tips would be wonderful!

1. Budgeting isn't only about income.
2. Do you know what (all of) your monthly expenses are?
3. Have you cut what you don't really need?
4. Is £1200 above your monthly needs?

If £1200 is in fact above your needs, then you should create an "excess earnings" account (or tea tin or whatever). Save the excess for lean months.

Then, in the lean months, parsimoniously dip into the "excess earnings" account (since that's the raison d'etre of the "excess earnings" account).

Most important, though, is discipline. No raiding the money tin for a night at the pub for a pint or 3 with your mates, or high street for a new dress or two!

[Toniixo]

Thank you both for your responses Both are helpful.

We do have an amount of savings, which we have instead of pet/house insurance.

Our monthly outgoings are as follows:

Rent: £320
Council Tax: £70
Water: £40
Gas/Electric: £135 (including debt repayments)
Internet: £32
Mobile (contract, tied in for 12 months): £28
Motorcycle insurance: £30
Motor Tax: £2
Food/household: £30 - £50 (depending on if we need 'stock/dry' items / laundry / toiletries)
Childcare: £400

Plus the following
Daughters school uniform : £50 yearly
Daughters regular clothes: £50 yearly
School trips: £10 yearly
MOT : £60
Repairs / Maintenance : £250

I also think it is crazy how we pay more in childcare the rent!

If anyone can find a way for us to save / cut spending further, please do. We have zero luxuries. My daughter gets sweets once per week, and goes to a free 'club' weekly. Other then that, we don't go out, we don't get take out, we have not had a holiday in 3 years...It sucks!

[Nutria]

I do sympathize. (And am jealous of your £28 Mobile and £50 food bill. We spend 10x as much for food on a family of four.)

Monthly outgoings adds up to £1107.

• How often is your income £1200 and how often £600?
• Can either of you get a second job part-time? (Would that jeopardize anything?)
• How much of the Gas/Electric is debt, and when will it be done?
• MOT? (We're not UK...)
• Parents or friends too far away to watch your child(ren) one or two days a week? (But certainly you've thought of that...)

[Permanent Temp]

I had a variable income once too. I miss it sometimes more chance for money now its stagnant. I looked for sources of information but most of it was for people with steady money. Some forum somewhere recommended the book below:

The Money Book for Freelancers, Part-Timers, and the Self-Employed: The only personal finance system for people with not-so-regular jobs by Joseph D'Agnese and Denise Kiernan.

I think it might help you, it really really helped me.

[greenskeeper]

I would budget for the lowest income and any extra per month would go towards paying down debt, savings, or investments.

[disneysteve]

I would budget for the lowest income

That would be the ideal but clearly isn't feasible here. If the lowest income is £600 that wouldn't cover the rent and childcare.

What is your average monthly income? In other words, what was the total earned in the past 12 months divided by 12? If that exceeds £1107, you should be okay. If it is less than that, this won't work unless you boost income or cut expenses.

Clearly the childcare bill is really killing you and it doesn't sound like you're earning enough to justify it. What if one of you stopped working and stayed home with the kid? You'd reduce your expenses by £400. How much would that drop the income?

Also, why are the repairs and maintenance so high if you rent? What is that money going for?

[greenskeeper]

That would be the ideal but clearly isn't feasible here. If the lowest income is £600 that wouldn't cover the rent and childcare.

Then they need to cut expenses and/or increase the minimum income per month to at least break even during the lean months.

[Nutria]

Then they need to cut expenses and/or increase the minimum income per month to at least break even during the lean months.

Did you read the reply where she listed her (quite minimal) expenses??

[disneysteve]

Did you read the reply where she listed her (quite minimal) expenses??

That's why I asked about the childcare issue. If a "good" month is £1200 and childcare is £400, that's still not really a feasible budget. It might make more sense for one spouse to stop working and eliminate the need for childcare.