If you have irregular or variable income, you still need a spending plan. When you don’t have a fixed income coming in, you are either in feast or famine mode, depending on how much money you brought home that month. One month, your commission check or self-employment salary might be $2,000 and the next month it might be $7,000. You never know how much money you have each month.
There are steps to get your Money Blueprint done when you have irregular or variable income. First, set a “salary” for yourself and live on it. You cannot think that all the money you earn is spendable. Remember, some months are feast others are famine.
Then Joseph said to Pharaoh, “The dreams of Pharaoh are one and the same. God has revealed to Pharaoh what he is about to do. 26 The seven good cows are seven years, and the seven good heads of grain are seven years; it is one and the same dream. 27 The seven lean, ugly cows that came up afterward are seven years, and so are the seven worthless heads of grain scorched by the east wind: They are seven years of famine.Genesis 41:25-27: NIV
Decide what your minimum monthly income needs to be to provide for your needs. This is your “salary”. If you are a sole proprietor, your business brings in income that must be deposited into a Business Account. Do not transfer all the business earnings into your personal account. Transfer only your salary amount no more no less.
In order to figure out your salary, do a Money Blueprint that will cover all your basic monthly living costs. These are food, housing, transportation, medical and so on. These are items that you cannot live without. Fun items such as eating out, partying, and clothes, etc. do not make it on this list. Only essential items. Your tithe, savings, and debt repayment must make it onto the list. This is your primary Money Blueprint. Our fun items, along with home maintenance, are items that need to be included as secondary items, which we know we can do without when money is tight.
If you have very large fixed expenses that eat up your money, you need to reevaluate these expenses. You might have to sell the car that has a large payment or the home that is costing you more than the recommended percentage. You need to make the tough decisions. No other person cares more about the money God has entrusted to you than you do.
Another way to create your Money Blueprint for irregular income is to make your blueprint more like a list. Get a piece of paper, at the top of the page write down first what you would pay if you only had enough money to pay one thing this month. Then, if you had money to pay a second thing, write it below. Keep doing this all the way down the paper until you’ve covered everything you could spend your money on, including debt repayment, giving, saving, etc. When you get your next commission check, or sole proprietor check, or whatever money you get, you’ll distribute that money down the list of expenses that you’ve prioritized. When the money’s gone, you stop. There is no more money to pay anything else. Draw a line on the paper where the money ran out. The items left over on your list are carried into the next month’s Money Blueprint. Having irregular or variable income is not an excuse for not doing a Money Blueprint each month. When you don’t know how much you’ll make next month or when you’ll get paid makes your Money Blueprint more critical!
The third way to create a Money Blueprint for an irregular or variable income is to look at your last year’s income and divide it by twelve. This gives you a monthly amount. If last year was either a particularly good year or a particularly bad year, then base your monthly average using either two- or three-years’ income. Therefore, you would add-up the income for the past three years and divide by 36. If you are only doing it for the past two years, than you would add-up the income for the past two years and divide by 24 to get your average monthly income. If during the current year you earn more money one month, put that money into your emergency fund. Then, when you have a really bad month, use the money in your emergency fund to cover your basic needs, your first priority items. You still need to include all your expenses in your Money Blueprint to ensure that your income will cover them.
Proverbs 21:20 – “The wise man saves for the future, but the foolish man spends whatever he gets.”
You don’t want to be most people.
- Most people don’t have any idea how much they are spending each month. As a consequence, they run out of money before they run out of month.
- Most people are overspending each month.
- Most people are wondering where their money went.
A Money Blueprint is simply planning ahead for how you will spend your money. This seems simple but most Americans do not practice it. The average person in our country spends $1.10 for every dollar earned.
It will help you get the big picture of how much you earn and your financial obligations and needs. Most have no idea. It will help you not to be surprised with quarterly or annual expenses.