I have created a budget based on our household income. My wife and I both receive monthly checks, so our budgeting process is pretty straightforward. Each month, we sit down and talk about our upcoming expenses, and the we allocate funds accordingly. We use cash for daily expenses, online bill pay to pay monthly bills, debit cards for groceries and gas, and our online savings account for non-monthly bills, short-term savings, and non-retirement savings. Our budget changes very little from month-to-month, but we still sit down to discuss any “out of the ordinary” expenses. For instance, our daughter is a gymnast and the expenses associated with gymnastics vary. Still, our budgeting process has become rather “routine” and only takes a few minutes to do.
Of course, life does not always go according to “plan”. Each month we seem to have at least one “unplanned for” expense. Now, we have created a “miscellaneous” category in our budget, but we only allocate a small amount in that category. Also, especially now that I make a little money from my blogs, we also have “irregular” income. Even before I began blogging, I would occasionally receive extra income from freelance work, as a birthday gift, etc. Instead of “over-thinking” our budget process, we simply combine the “unplanned for expenses” and the “irregular income” into one, easy-to-manage system. Any money that I receive in the form of irregular income goes directly into my savings account. Any unplanned expense that I might have gets paid for out of my savings account. (Of course, I have to make a transfer to my primary checking, but you get the point.) At the end of the month, any “left over” irregular income gets allocated to long-term or retirement savings. Also, if irregular income does not “cover” unplanned expenses, money budgeted for “miscellaneous expenses” will be used.
I am super-strict about my salary, and I budget “to-the-penny”. I treat irregular income a bit differently. I allow myself to have a little fun, buy a few “extras”, take my wife out to dinner, etc. In other words, I have a bit of a “life”!
How do YOU manage irregular income and unplanned for expenses? Leave a comment and let us know.