Some people have regular incomes, but most people have some degree of variability to their income. If you get paid biweekly, you’re going to get paid twice a month except 2 months of the year you’ll get 3 paychecks. If you have additional variable income from other sources, take this into account. If you’re self-employed or work on commission, your income can be highly variable
If you have a very regular, consistent bimonthly income, then create your budget based on the average of two paychecks a month. If you get paid monthly, and it’s pretty consistent, then go with your average over the past 6 months (take your last 6 paychecks, add them up and then divide by 6).
If you have an irregular income, things can get more complicated. What I recommend for this case is to try to create a budget that fits within your smallest monthly income for the past year. If you live on straight commission, or have some other variable income (let’s say you get a base pay plus commission, or you have several part-time jobs, variable hours, or bonuses), then you’ll want to try and do the same thing. Depending on your previous habits and obligations, it may be hard to budget based on your lowest monthly income. But that is the beauty of a budget… by having an idea of how much you actually bring home and by creating a plan for where you are going to spend your money, you can actually change those habits. That’s the whole point.
Oh, one more thing:
Nobody said it’s going to be easy.
Getting out of debt is difficult. Much much more difficult than getting into debt. Getting out of debt doesn’t have the immediate gratification of making a purchase. Our society has essentially trained us that if we buy something we want, we’ll feel better about ourselves. It might actually even be true, but only for a very short while.
So make sure you spend a little time thinking of why you are doing this. What is going to be the benefit to forgoing those impulse purchases? Less stress every month whenever bills come due? Getting creditors off your back? Saving for regular vacations? Saving for your kids’ college funds? Having something set aside (financial margin) so that you can make it through those bumps in the road life always sends our way (it won’t hurt so much then)? Changing your financial future and maybe even that of your entire family? Retirement? Everyone has a different place they come from. Everyone has different motivation that works best. You’re going to have to find your own.
The Actual Budget
Look at where you have been spending money. Create overall categories. Start with something like:
- Savings/Future Purchases
Obviously your categories are going to be different. Break it down further into subcategories. Food may have the following subcategories:
- Fast Food
(Don’t sweat it if you get non-food items at the grocery store or Wal-Mart. Do make note if you make a large purchase like a TV, computer, furniture or stuff like that as it should go into other categories)
If you take your statements, you’ll be able to see where you’ve been spending your money. Take that as a baseline and then decide how much you should be spending on each category.