Budgeting With An Irregular Income

Today’s Whiteboard Wednesday is dedicated to those of you with extremely variable incomes, but especially the college kids. Maybe you worked all summer and now you have a chunk of money that has to last you until June or you took out a loan that you’ll be living off for the next nine months. If this sounds familiar—keep reading/watching.

When budgeting with an irregular income, you will always start with the same question: What does this money have to do before I’m paid again?

If you have a big chuck of money (a loan, a big sale, a summer’s worth of saving…), it’s tempting to look at the total and think, “Oh wow – I’m kind of rich! Party!” But, no. Because you are not. You are the opposite of rich.

You need to manufacture current scarcity. If you divide that money up by the nine months you’ll be in school, and give yourself 1/9th of the money to spend each month, do you still feel rich? That not-rich feeling you are feeling? That’s scarcity. And it’s a good thing.

Scarcity forces you to flesh out your priorities. Scarcity helps you follow Rule One: Give Every Dollar A Job, much better. And demands you consider Rule Two: Embrace Your True Expenses, because there are going to be a lot of rainy days between now and the end of the school year.

Embrace the scarcity.

Own the scarcity.

Love the scarcity.

It is precisely that scarcity that will get you through the year with money in the bank. It will drive better decisions. It will provide peace of mind. These are all good things for which you will need to thank your new friend, Scarcity.

We want you to think, “Oh wow – I’ve got this big pile of money! Oh wait – I’m still broke.” That is healthy. Because that is reality. Especially if we are talking about living off loans.

So divide up your money into smaller amounts, and budget those smaller amounts monthly. When you manufacture scarcity, you will see the quality of your decisions go way, way up (instead of your credit card balances). This is also a good thing.

It doesn’t have to be so hard. Use the budget to make decisions. Trust the budget. Don’t think about your money so much. The end.

If you can’t wait until next week for more whiteboard wisdom, you can view the entire Whiteboard Wednesday library here. If you have a question or an idea you’d like us to address in a future Whiteboard Wednesday episode – we’d love to hear from you! Email us at email@youneedabudget.com.

Until next time…