Budgeting with Uncertainties | Sustainable Personal Finance

Posted by on February 17, 2012

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Income stability has been something that I have yet to experience in my adult life. In a struggling economy with the number of contract, part-time, and temporary positions increasing, I imagine that many others, especially those just starting out in their careers, are experiencing a similar degree of financial uncertainty. It can be difficult to plot out a household budget when your income is constantly fluctuating. Being a single(variable) income household with a young family, my husband (DH) and I have faced many challenges before finally coming up with a financial plan that suits our needs and works best given our income situation.

My husband is our primary income earner. His work is not salaried (no work = no pay) and is very much a part of the boom-bust economy. When times are good, he can earn nearly double his usual earnings with overtime. Alternately, at times, he has narrowly escaped lay-offs, working as little as half of his regular hours for weeks on end. Work is weather dependent. Impromptu days off ? although always a welcome break in our eyes ? obviously have negative impacts financially, as do sick days.

Being a recent university graduate gone back to graduate studies and having two young boys, my own contribution to the finances has also fluctuated widely with periods of no paid employment, F/T and P/T employment (at varying pay scales) and at times receiving maternity benefits from the government. Because of all this, our household income is never the same in any given month.? It takes some will power not to become overly indulgent when earnings are good and quite a bit of creativity to trim the budget other times.

How do we deal with it?

Our?budget is based on 75% of DH?s average earnings. We try to get by taking on little debt to avoid high fixed monthly costs.

Where possible, we have arranged?smaller incremental payments?(i.e. weekly, bi-weekly) and have spread payments evenly over the month. This helps to ensure we don?t have a large amount of bills due at one time and has benefits such as quicker mortgage/loan repayment.

We pay more taxes.?Yes?more. We both arrange to pay more income tax so that come tax time, we get money back. Which leads me to how we handle our debt/savings.

In having an extremely variable income, we?ve struggled with committing funds to savings and debt repayment. Contrary to the advice of financial planners, committing funds in these areas just hasn?t seemed like the right decision for us since our circumstances could change at a moments notice and we are always hesitant to bite off more than we can chew. As for?investments, we?contribute minimally to RESPs and tax-free savings accounts. We also have some home equity. Although we have sought out minimal regular contributions, we try to make additional annual lump sum payments when possible.?We also pay a fixed amount for life/disability insurance which is especially important for us since we are primarily a one income family and the chances of injury are high in my husband?s line of work.

One of our short term goals is to start?contributing in some small form to RRSPs?once I have a more stable income. We are lucky my husband has a pension and health/dental benefits through work.?For debt repayment, we?ve generally stuck to the minimum payments and paid debt off using the snowball method (we are small gains incentive type people!) when we?ve had additional funds.

Something we?ve been working on has been making a conscious effort to?contribute any additional earnings beyond our budget to an accessible emergency fund?- which we have dipped into on a couple occasions to supplement our budget due to sickness/weather.

These are just a few of the things we?ve found to work best for us given our experiences, circumstances, and values. How do others budget with a fluctuating income?

This is a guest post written by a personal friend of Mrs. SPF, Kristy, who?blogs at Treating Softly a pretty cool site that pretty much hooked us as soon as we learned of it. ?Funny how you might know someone and have no idea they blog! (for Treading Softly and us!)

Source: http://sustainablepersonalfinance.com/budgeting-with-uncertainties/

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