You’ve just opened your bank app to check your pay deposit, and it’s a different amount – again! How are you supposed to plan when you can’t predict how much your paycheck is going to be?
Everyone knows that it is easier to put your money in the right places if you have a plan. Most of those plans (usually called a budget) revolve around knowing how much income you will have, and calculating your savings and spending around that income. But what do you do if your income changes every month?
Military families often have this situation. Maybe the servicemember is moving in and out of a tax-exempt combat zone, or receiving Family Separation Allowance because of a long training, or you receive a Cost of Living Allowance that varies based upon the local currency exchange rate. Any way it happens, it can make you crazy if you don’t have a plan to deal with it.
Note: this plan is NOT for people who have huge fluctuations in pay, like commissioned salesmen or seasonal workers. It’s for those whose pay might go up or down within a range of a few hundred dollars.
After many years of experimenting, I think I have finally hit on an arrangement that solves this problem. Instead of trying to budget every cent of an income that changes every month, I picked a nice, even number that is just a bit lower than the lowest pay my husband ever receives, and I build my spending plan around that number. Any pay that exceeds that amount gets swept off and put towards debt payment or savings.
Let’s say that Sailor Steve usually brings home between $2100 and $2200 every paycheck. Steve could build a budget around a $2000 paycheck. When his pay is deposited, he goes in and does a transfer of the amount that exceeds $2000. That extra money can go to debt repayment or savings.
On the off chance that Sailor Steve has a paycheck that is less than the budgeted amount, he have two choices: either fit that pay period’s spending to the lower amount, or tap into savings to make up the difference. Either choice is fine, as long as the savings can be repaid quickly.
Please note that this bonus money is not the only debt repayment or savings in a good budget. This is extra, on top of your regular debt payments or savings plans. If you’re debt-free, and already on track for other goals, this can become savings for something non-essential like travel, can boost other savings like retirement or college funds, or can be used for charitable donations.
For me, this is much easier than trying to adjust our budget to meet my husband’s changing income. I have a consistent figure with which to plan, and our savings account gets a little extra boost with each paycheck.
Do you have a trick for dealing with inconsistent paychecks? Please share, so we all can learn.