If you have been reading this blog, then you know the reason I have become so hit-and-miss with my posts is that I am up to 3 jobs now.
I was hoping to quit one of them soon, however my husband has informed me that he does not have any jobs (at all) lined up after 6 weeks from now.
He is in construction, and in the good days had work lined up for 2 years. Now we are looking at weeks at a time. Scary. If only we had had the good sense to save when we were making that much money.... Oh well, that's water under the bridge now.....
So, 3 jobs for me it is.
We have never had what you call a steady income. He has always been in construction, so he gets paid after spending lots of money on materials (He works for himself) and the paychecks could be in 2 weeks, 4 weeks, 2 months, there is no telling most of the time.
I have worked for tips, and then on 100% commission, then both. Now I have a job where I work for tips, one for commission, and one on salary. I wanted the salary job so when I (hopefully) conceive, I can quit my for tips job. (A big baby belly and that tight outfit just wont cut it, lol...)
My salary is very low, very... Like well below the federal poverty line. I do get excellent health benefits, so once I have those taken out of my paycheck, and taxes the 40hr a week job makes me about 230$ a week. The cost of living in Alabama is pretty low, but not THAT low. I can supplement by bar tending at least one night a week. I can make from 100-200 ish (It always varies).
That puts me working about 50-some odd hours a week. Now for the commission job.
That is so unreliable, that I never factor it into my budget. Never, ever.
I can remember crying with a client when her buyers backed out 2 days before closing. She had to sell, she could not afford the house anymore, and I needed that paycheck to buy food and keep the lights on.
Since that terrible time in my life (That whole year was that awful, gut wrenching, stressful feeling you get when you are broke, and have no idea when the next check will come), I have made vast improvements! That was in 2010. Now, (Drum roll please......)
I just paid off my last credit card!!!! Who-Hoo!!!
In fact, since I found Dave Ramsey's program, the Total Money Makeover in August of last year, I have paid off
10,300.00$$$
Yes my friends. I am super excited. ten thousand, three hundred dollars, that I no longer owe.
By the way, I spent NO money to learn the Total Money Makeover. There are classes you can sign up and pay for, but I got the library book. **Free**. I recommend you try it that way first, especially if you are in as bad financial shape as I was at the time, 18.99 for a book? I couldn't afford that.... When you are better you can buy the book. (By the way, I cheated further, I listened to the book instead of reading it. Dave makes a great audio book. I now listen to the radio show as much as possible to keep me motivated).
During this time I was still paying on my car payment and mortgage which have come down slightly.
Those are my only, and last ever (God keep me strong) debts.
I still owe-41,089.03 on my house
7,000 on my car
Get to it, your saying. Tell us how to make a budget.......
Ok! How I did it.
Before I even started the TMMO, I had a fight with my husband (We used to have lots of fights about money, like I am sure many of you have too).
He didn't understand, how he could work so hard every day, and we could still be broke.
Well, he demanded to know where all of our money was going. In my anger, with tears of frustration and fear in my eyes, I sat down and in a couple hours had a completely comprehensive outline of where our money was going.
1. Look at your bank account
I sat down in front of my computer and pulled up my 2 credit card accounts, and my bank account.
I separated into categories, where our money had gone, over the last year.
Grocery shopping-this included trips to walmart, sams club, any grocery store for food or toiletries.
Bills-I found every bill payment made over the last year.
Gas- We drive a lot, only gas in this category.
Dining out- Used to be a weakness for us, not anymore!
Entertainment- Into this category went movies, alcohol, pretty much any junk we bought at a gas station.
Miscellaneous- This is where I put oil changes, clothes, makeup, stuff you need but don't need to have on a regular budget
Work expenses- We both have to spend money on licenses, materials, ect.
For example:
Bills- I know our power bill varied from about 90$ to 350$ depending on the weather- so I added all the last 12 bills and then divided them by 12 to get the average we paid every month.
We pay an average of 125$.
That is the number I use for my budget. Yes, it changes every month, but my budget has a little flex to it, because of the nature of irregular paychecks. If you are on irregular paychecks I suggest you do the same.
Groceries- I searched for every charge to a store where we bought groceries over the last 12 months. Added them, and divided by 12. That gave me the average of how much we spend on groceries.
I decided to cut that number down (Substantially) by couponing, preserving our own produce, and by saving our favorite and more expensive meals for special occasions. I also cook from scratch. (More time consuming for a while, but it quickly becomes second nature. And you will impress your friends ; )
Starting to see a trend here?
Lets do Gas.
I looked over the last 12 month for all our gas charges added them, then divided by 12.
Though, after a few months you really start to see a trend. I fill up twice a week, he fills up once (Usually).
If you do not use a card regularly you will need to pull out your receipts. If you have not saved receipts, sit down and try to remember the last 30 days. Start with the last week, and work your way back. You might have to look through your cabinets and check your phone and facebook, anything to remind you of what you have done, so you can remember how much you spent. Use that as an estimate. Then you can begin tracking your money regularly and update your budget as you get more accurate figures.
Now you have all your estimated expenses for every month.
2. Add your yearly expenses
I have bills that only come around once or twice a year. My trash service charges quarterly. These expenses need to go into your figures as well.
For the quarterly charges I added up the charges for the year, and divided by 12 to get how much it would add to my monthly expenses.
The yearly charges I add as a total amount at the bottom.
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3. Find your yearly amount
Now that you know your monthly and yearly expenses, add them together to find out how much you need every year to survive.
I changed the amount we spend on groceries to 200$ a month, our entertainment budget is 120$ a month, eating out (for work lunches mostly) is 100$ a month. I used these numbers, not the scary stupid large numbers of our averages for our budget amounts.
Things like the power bill , car payment and gas don't change for the most part. (You can car pool, reduce energy waste and buy cars with cash but that is another post)
Our yearly amount that we spend (If we stay on budget) is
44,549.16$
We HAVE to make at least that amount to avoid going into more debt, or losing anything.
So that is our starting point.
You have to remember that this number will decrease as you simplify your life, reduce frivolous spending and pay off debt (Never to charge again! Debt is folly, according to God and Grandma, as Dave says).
Add up how much you make each year.
Because ours is un-reliable I used a low estimate of our reliable (hehe, yeah right) income. I recommend you do the same. If you make more that is just gravy.
Add up your total household income (Yours, your spouse, and child support payments, anything you regularly get money from)
and subtract the amount you spend yearly.
For example:
Say we make 60,000$ each year
60,000
-44,549.16
= 15,450.84$
That 15,450.84$ is money that we have been blowing on crap we don't need, or even remember buying half the time.
That is what we use to pay off our debt.
How to pay off the debt
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| One bite at a time ;-) |
This might sound silly, but many do not know how to accomplish this.
I didn't.
I thought, like many that you were supposed to pay off whatever has the highest interest rate first.
Nah, there is a better way.
Line up your debts (ALL OF THEM) from smallest to largest.
Example: (this is what I was looking at when I did this)
Mortgage: 42,000
Car : 12,000
Credit Card#1: 6,500
Credit Card #2: 2,600
Money borrowed from parents: 700
School loan: 500
For many of you this seems like a small amount of debt, for some a huge amount. It is what I was dealing with.
To pay them off: Continue making the minimum payment on all but the smallest debt. Mine was the 500$ I had left in school loan debt.
ANY AND ALL extra money you have in the month over your budgeted expenses gets put on this.
Even if it has the lowest interest rate. I was paying 50$ monthly on this debt. However, applying all my extra funds to it I actually was able to pay it off in less then a month.
Ahhh.... that felt good. Suddenly my list of debt was shorter. I may have only paid off 500$, but I felt as though I had accomplished something.
And now I have what ever my regular extra money was + 50$. Apply that to paying off the next debt.
My parents didn't charge me interest or a monthly payment, but I paid them off as soon as possible. It is not fun to owe someone money.
Next thing I knew I had that paid off. Now all my extra funds, above bills and living expenses are getting applied to the first credit card.
It got paid off!!!
Next, we apply the 50$ from the student loan payment, the 100$ minimum payment from the smaller credit card debt, and all extra funds above living expenses to the next credit card.
And it pays off even quicker!!!!
This is Dave Ramsey's "snowball effect" . I can't take credit for it.
Do you see what we are doing here?
By paying off the small debts first, you get the satisfaction of ticking an item off the list(It keeps you motivated to stick to your budget). Now that it is time to start tackling the car payment, I have the 50$ from the student loan, 100$ from the cc#1, 130$ from cc#2 to add to the payment. That is an additional 280$ a month to pay off my car. That is going to pay off the car in half the time, even if I do not have anything extra in my monthly budget to pay it off with.
When the car is done what will I do?
By another car of course. NOT!!!!!!
I am going to take the 280$ + my car payment (268) + any extra money monthly +my house payment and pay off the house.
That will give me at a minimum 1,248$ to use to pay off my house. So at the very least I am doubling my house payment and paying it off in half the time. ( I refuse to do the very least, I am on a roll!!!)
When I have no payments of any kind, my monthly expenses drop to less then 2,000$ a month including food, fun and gas.
That will give me about 1500$ a month to save.
Can you just imagine?
Paid for car, paid for Home, No fear of losing them, ever! (Of course you keep insurance on them.)
Savings in the bank for emergencies! Once I have 6 months of living expenses saved ( That will only be 12,000$, and at the bare minimum I can have that done in 8 months if I ONLY pay what I am used to and no extra, then the rest can go into investing.
Crazy. I grew up in a family that has always struggled, lived paycheck to paycheck and in debt.
And now I am talking about have extra money for investing.
That is the American dream.
I am tearing up writing this just imagining how great that will be. After all the struggling and fear, pain and fights, to have that kind of security will be amazing.
Amazing.
I hope this has helped you work out your irregular income budget. Please do check out the book The Total Money Makeover. If you have any questions or comments I would love to hear them.
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