In this economy, many of us are looking for a little extra cash wherever we can get it, which means your income may vary greatly from one month to the next. So how do you budget accordingly?
Personal finance weblog Get Rich Slowly tackles the sometimes complicated subject of budgeting for an irregular income. The post is written from the perspective of a professional blogger, but it applies just as well to most anyone who's self-employed or does freelance work. In a nutshell, the author suggests projecting your cash flow as best you can and then building your budget with a couple of different bank accounts.
- The first is your "business" account (without quotes for those of you who actually own businesses), which is where you deposit all of your income. My business account is a high-yield savings account with ING Direct. (You might use FNBO Direct or some other bank. Just choose something with a high interest rate.)
- The second is your personal account, and it's from this that you'll pay your ongoing expenses. There's no need to open a new account if you already have one that will work. I just use my existing credit union checking account.
From this money, pay yourself as if you were an employee. Your monthly salary is whatever you calculated as your monthly budget, your minimum monthly income from the past twelve months.
Head over to the full post for a thorough rundown and several useful tips on the finer points of budgeting with your irregular income, then let us know how you've handled your budgeting in similar situations in the comments.
