One of my readers asked – how do you create a budget without a steady income? This is a reality for millions of people: Uber and Lyft Drivers, College Students, Commission Sales, Part Time Employees and many other self employed people. Approximately, 15 million Americans are self-employed, and have income that comes in at different times and different amounts.

So how do you create a budget when you do not know how much you will make next week or next month? I have met some people that excel in this environment and make more than enough to cover their expenses and others feel like they are jumping off the Eiffel Tower. While in college one of my jobs paid commission only and it taught me a valuable lesson. SALES IS NOT FOR ME! I was constantly broke.

Where do you start? Build your budget. You can make it as complex (spreadsheets, pivot tables that Einstein would love) or as simple as a single sheet of paper. The single sheet is more my preference. So lets get started and build a budget that accounts for variable income.

BUILDING YOUR BUDGET

1. CALCULATE YOUR BASELINE OR SURVIVAL BUDGET
While your income may be variable and erratic, some expenses you have no choice but to pay, or be evicted, freeze in the winter, starve etc.
• Rent
• Groceries
• Transportation
• Utilities
• Childcare (if applicable)
• Cell Phone (I am including this as a need in honor of my daughter. She absolutely cannot survive without her Apple phone!)
• Renters Insurance (you can get by without renters insurance, but remember, if something happens to your apartment, your landlord is NOT responsible for any of your personal possessions (furniture, laptop, clothes, shoes, 100 inch Smart Flat Screen TV, etc);
• Car Insurance
• Anything else that is mandatory for your survival.
The total amount gives you a MINIMUM INCOME to survive. There should be zero wants included on this portion of your budget! Let’s assume that number comes to $1500.
Below link provides recommended ways to reduce your expenses.

6 Monthly Bills That Almost All of Us Overpay

2. CALCULATE YOUR WANTS (THE GOOD STUFF) BUDGET
Look at your past few months of debit or credit card charges and your checking account.
• Netflix, Hulu
• Starbucks
• Eating Out
• Movies
• Bottomless Mimosa Brunches
• Hobbies, etc.
Depending on your income you may need to cut some or all these expenses, UNLESS you have an emergency fund, to cover six months of your baseline monthly (NEEDS) budget of $1500.

3. CALCULATE YOUR TOTAL EXPECTED MONTHLY EXPENSES
I recommend for the first month, exclude all wants and determine if you can earn enough income to pay for your needs. Later you can add the wants you cannot live without, if your income can support it. So your baseline budget is $1500. This is your bare MINIMUM monthly income requirement.

4. EMERGENCY (SAVINGS) FUND
We all need to create an emergency fund/savings account. When I was an independent consultant, some months my income was ZERO! Maybe one Monday morning, after I had way to many few of those bottomless mimosas I tell my boss she has the breath of 10-day road kill. Surprisingly she does not have a sense of humor and fires me! The nerve of some bosses! The second reason I strongly recommend you build an emergency fund is to get use to saving part of your income for THE REST OF YOUR LIFE. At this stage set a goal to build up minimum of one-month baseline expenses, $1500, emergency fund. Try to add to your emergency savings account each paycheck. When you exceed six months baseline expense dollars, consider an investment account. {I will be posting a future blog on opening your first simple investment account.}

5. INCOME
Look at your past 12 months of income and use your lowest-paid month as an income baseline. If you are a college student identify your projected college scholarships, college loans, grants, funds from parents, etc. If this is less than what you calculated in Step #3, Google the best plans to rob ATM machines. Ok, for the potential psychopaths on my reader’s list- THIS IS A JOKE! You need to recognize early in the budget process {prior to the power company turning off your power/unable to charge your phone} you have a budget short fall. You may have to find a second or third job, take out more student loans, find roommates, move back home, etc.

6. BANK ACCOUNTS
If you do not have a savings and checking account open both. Google local banks and select the bank with best terms. Some colleges have free checking for students. Many large employers have credit unions that offer savings and checking accounts. Look for banks that offer free checking as long as you maintain a balance over X (lowest $ amount you can find). Identify Savings account that pays the highest interest rate (you will be disappointed how low this number is). Your first savings account is your vehicle for emergency funds.

7. OVER DRAFT PROTECTION
Apply for over draft protection on your checking account. This protects you when you are a little low and did not have enough money to cover one or more checks. You may be able to link your savings account into your checking account so that it automatically transfer funds when your checking account is low. Try to NEVER bounce a check. You will be charged two expensive fees. First the bank will charge you $25 to $40, per bounced check. And the recipient of the bounced check will charge you an additional $20 to $40 per bounced check. As you can see, if you bounce 3-4 checks, you lose hundreds of dollars! DO NOT WASTE $100 or more of your HARD EARNED dollars on bounced checks! Remember that emergency fund!

8. DEPOSITS – CHECKING AND SAVINGS
When you receive your paychecks, if possible make two deposits. Many employers will automatically deposit your paychecks into at least two accounts. Deposit your baseline budget (if possible add a 10% buffer) needs into your checking account ($1500 or $1650 -with the buffer). All money remaining deposit into your savings account. If your check doesn’t cover everything in your baseline budget, prioritize what you need to pay. And if you have the funds in your savings account transfer to your checking account. If you get an additional check during the month, pick up where the last check left off. If you end up with extra money after all expenses have been paid, then you can add to your savings account. (If you have debts, definitely start paying them first!). Your paychecks may be for different amounts each check, but with a plan, you can use get financial peace of mind.

The above can be done with paper and pencil, or select one of the below FREE apps. Luckily, these apps make it easy for even the most math challenged individuals to track spending and savings.

• Every Dollar App – Dave Ramsey’s FREE Every Dollar app is a simple budget tool. You can label every income stream and expenses. You will be able to track and see all of your transactions against your Every Dollar budget.

• LEARNVEST – A popular budgeting app that connects directly to your bank account and updates your spending automatically. You can create any number of budgets, and as specific as you like: coffee, movies, bottomless mimosas and other necessities will all be accounted for. If you’re using a credit card for the first time, it makes sure you never unknowingly charge what you cannot pay back. The Cash vs. Credit feature lets you see your total credit card balances versus the cash you have.

• MINT– Creates simple budgets that make sense today and set you up for success tomorrow. See bills and money together, so you know what’s due, when it is due and what you can pay. Receive alerts for unusual account charges, and get custom tips for reducing fees and saving money. Get your free credit score and learn how you can improve it now to get the things you want later.

Many more free apps are available. Search in your app store or Google. Select the one that is right for you and if you do not like it, try another app.

CONCLUSION
If you have not lived with a budget before, it can be difficult to stick with the program. It might be hard to avoid impulse/“Wants” purchases. As your career advances and you start earning more income it will all be worth it. Where you were once living with a fluctuating income, you are now earning a steady stream of income, saving more than in the past, and doing it all on your own terms. That’s something worth celebrating!