If you’ve been putting off creating a budget because your work from home income is irregular, you’re not doing yourself or your family a favor. I understand, it seems like it’s an impossible task, but if you want this to work, budgeting is one of the important steps to get you there. It starts with putting all the finances down on paper and creating a budget. If not, your financial crises will continue. Or get worse.
It’s easy, I promise.
Most families have one or two sources of income. And when they come in regularly, it makes it easy to create and stick to the plan. But when at least one of those incomes fluctuates like a bouncing ball, it’s a little trickier. Still doable flow.
One of the other big problems of budgeting is when there are multiple spenders who aren’t on the same page about financial matters. This is why families need a formal budget, WAHM or note.
The most important part of the family budget is getting it all down on paper. There’s something about seeing those numbers that put everything in perspective. Take out paper and pencil (with an eraser) to get started.
How to Create a Budget
A budget is simply a running list of what comes in and what goes out, so let’s get started.
If you’ve had a WAH income for a while, use the last 6 months to come up with an average income for budgeting purposes. If you’re just starting, count nothing now. And don’t plan in “what you think you’ll make.
- Take inventory of all income. Pull out your pay stubs for the last 3 to 6 months. We want to get an idea of where you’ve been. If a certain source of income fluctuates from month to month, use the lowest amount.
- Go back over your last 3 to 6 months of bank statements to add gather your expenses. Also, try to estimate what you may have spent out-of-pocket (but you should keep track of that, too, but that’s for another post). Or, if you want to only go forward, keep track of all expenses for a month or two. Save all of your receipts and ask the rest of the family to keep track of their money as well
- Add up your monthly expenses. Be sure to include bills, debt payments, groceries, and everyday expenses such as lunch money and transportation costs. Don’t forget to add what you put away for savings and retirement. You want to know where every dollar goes.
- Add up and average your expenses for these 3 to 6 months. Compare your income against your expenses. What do you see? Are you running a deficit? Or do you see extra money every month? If you do, have you been saving that?
- If the budget needs a serious trimming, get the family together and discuss ways the options. This will be important if you’re expecting and an irregular income. Getting the family on board will help you determine which expenses are necessary and which ones to cut or eliminated.
- Besides individual expenses, discuss how you can cut down on the electric bill, groceries and other necessary family expenses. Consider such things as carpooling or taking public transportation, buying more generic foods and adjusting the thermostat.
- Estimate how much you can save on regular expenses and cut the unnecessary items out of the budget. Then refigure it and see where you stand.
- If you end up with a surplus, allocate it to savings. If you’re in the red, go back and rework the budget until you have more income than expenses.
Be Frugal, But Realistic
If you know your income will fluctuate then plan on living at the lowest end of your budget. And save every extra dollar you can in an emergency fund. At the same time be honest and realistic with your needs. One reason that family budgets often fail is because they’re just not realistic. It’s great to cut down on expenses, but sometimes we go too far. For example, cutting entertainment out of the budget might look good on paper, but we all need a little diversion enow and then.
Instead of cutting such things out of the budget, consider lowering the cost. Going back to the entertainment example, maybe you’ve been going to dinner and a movie as a family twice a month. But eating in and renting a new release would be much cheaper, and you would still get to spend quality time together.
Individual expenses can also be tricky. Resolve this by allocating a certain amount for each family member to spend each week. If someone spends his entire amount before the week is up, reevaluate his expenses and adjust.
When one (or more) of the family income fluctuates, it is more important than ever to create a budget and keep spending under control. It’s the only ways to meet your goals and make this work from home ideas successful. Financial guru Dave Ramsey (my hero), says it this way: “A budget is telling your money where to go instead of wondering where it went.”
He also said budgeting isn’t rocket science, so don’t be intimidated. But to succeed, close monitoring is essential. Your efforts will be rewarded, however, with less financial stress and more money in the long run. Now that’s what we want for our irregular work from home budget.