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Budgeting on a variable income

Budgeting is tedious and annoying at the best of times. Add in the complexities of a variable or commission-based income and you’re up against a whole new set of challenges.
 
Whether you’ve recently changed jobs and find yourself floundering with the ups and downs that come with the territory, or you’ve been wading through the world of bonuses, tips, commissions and hour cuts for a while now, be sure to continue reading for some smart budget tips that are sure to take some of the stress off.

Tip 1: Assess your financial situation

Do you have a base salary? Are you hourly? Do you earn a good proportion of your income off tips? Can you count on any side-income? Whatever it is that makes your earning situation irregular, it’s time to come to terms with the fact that you’ll have to handle your money a little differently than your salaried counterparts.
 
Take a good hard look at your track record and outline all your monthly potential earning outcomes. Have a good understanding of what a really great, truly terrible, and exceptionally average month looks like and the amount you’ll take home (after taxes and benefits!) each month for each scenario.

Tip 2: Establish your baseline budget

At its most simplified state, how much do you require on a monthly basis? No, this should not include your Netflix subscription or monthly clothes shopping allowance (that’s coming, we promise). Learn the difference between wants and needs, and only include your needs in this group. Some good expenses to account for here include housing, utilities, transportation, food and other groceries, childcare, debt payments and recurring medical expenses.

Tip 3: Add in your discretionary expenses

This is where you dump in your “everything else” list–things that you regularly pay for or subscribe to. In this group, be sure to include the cost for things like entertainment, hobbies, shopping allowances, streaming subscriptions, gym memberships and your Starbucks addiction.
 
Helpful hint: review your previous transactions in online or mobile banking to see where your money really goes instead of working from memory or estimating. While you’re at it, see if there’s anything you should cut out of your spending patterns.

Tip 4: Establish how much you need in your emergency fund

Emergency funds are important for anyone, but they’re absolutely critical for those living on a variable income. Remember those abysmally terrible earnings months we talked about earlier? No matter how good you are at your job, bad months are inevitable. Having enough in an emergency fund to cover your expenses without having to take on high-interest debt takes the pressure off and puts you in a much stronger financial position. We recommend setting aside enough to support yourself for a few months without income.
 
Helpful hint: create a separate account and have direct deposit set up to automatically deposit a percentage of your income to this account with every paycheck. If the money never even hits your spending account, you won’t even miss it! Plus, you’ll be far less likely to spend it on those “wants” we talked about earlier. 

Tip 5: Don’t count your chickens before they hatch.

Thinking of booking a vacation with the money you’ll make on that big deal that is almost guaranteed? Hold it right there. Unless the paycheck has hit your account, resist the urge to mentally account for that money. Any number of things could go wrong between a deal-closing handshake and your cut hitting your account. 

Tip 6: Don’t blow it, save it.

Make a big sale? Receive a nice bonus? Get a hefty tip from an exceptionally happy customer? Resist the urge to spend it. Instead, put it aside in an interest-earning account.
 
Have you recently dipped into your emergency fund or happen to be carrying around high-interest debt? That should be where you start with any above-average income months. While it can be tempting to treat yourself above and beyond your typical budget-conscious spending, your future self will thank you for making the smart choice.
 
Helpful hint: Living on a budget doesn’t have to be restrictive and boring! If you plan right and don’t splurge unnecessarily, you can have a “treat yourself” line item in your discretionary spending budget. Start building your budget here!

Tip 7: Don’t give into lifestyle creep. 

As you grow in your career and refine your skills, you’ll likely close more deals, become more efficient, or even get a bump to your base budget. Instead of inflating your lifestyle to meet the standard of your new income, learn the art of being content. Revisit your spending habits often and assess where new spending leaks might have sprung up. If you notice a bump in your spending habits in any particular area, think critically about your priorities and refocus your efforts.
 
Helpful hint: Log into Online or Mobile Banking and check out our Personal Financial Management tools. The budgeting tool helps you track your money and categorize your spending. Want to learn more? Click here to access the Personal Financial Management videos under the Digital Banking Video Tutorials.
 
We won’t lie. Creating and sticking to a budget on a variable income is a difficult task, and the stress that is associated with the lifestyle can be draining and difficult to manage. However, with the right set of tools and a solid budget and spending plan, you can make it work for you and really thrive!
 
Have questions about budgeting on a variable income? That’s what we’re here for. We’ll help set you up with the tools and accounts you need to successfully navigate to a financially secure future.
 
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