My husband and I are employed on a casual/contract basis in that we get paid per day we work. If we don't go to work (sick, annual leave, public holidays) then we don't get paid. We work around 220 days per year each, so I have worked out what we are likely to earn in a year and what that would be each month if the income was spread evenly over the months.
In a month where we do not take any days off, we earn more than the average monthly amount. Currently I record this surplus amount as Holiday Savings (should probably called Time Off Savings) and transfer it to an off-budget account, but the money actually still stays in my transaction account.
The issue I have got into is when we have a month where we don't work every day (my husband just had a knee operation and had a week off work), I make up the income shortfall by recording spending as an outgoing from the Holiday Savings category. In my view we are just accessing income that we have put aside. I have quickly realised that having the Holiday Savings on an off budget account doesn't work when I start recording transactions against it as it doesn't show all expenses in the budget. But if I did have it as an on-buget account then this would show we have spent more than our income for the month.
Also I only want to use a proportion of what is in the Holiday Savings budget - an amount equivalent to the time taken off work that month i.e. a top up to the average monthly amount we should have. It is difficult to remember how much of the Holiday Savings we are allowed to use as an income top up, and how much of that has been spent of that already.
For example: Let?s assume that the average monthly income I think we will earn over the year is $1000 per month.
Month 1 - earn $1200 so $200 is budgeted towards 'Holiday Savings'
Month 2 - earn $1300 so $300 is budgeted towards 'Holiday Savings' - total is now $500
Month 3 - earn $900 (due to days off sick), so need to take $100 from 'Holiday Savings' to use as an income top-up for the month
I am looking for ideas of how I might manage this situation better.
My initial thought was to assign the surplus income to the following month - but this is very difficult to keep track of, as we are also trying to get to Rule 4 - Live on Last Month's Income. This makes it difficult to track what is surplus income that will be needed to be used for days off, and what is income that is truly usable to get a month ahead.
Another idea was to not record the total amount of income, and just record what the monthly average allowance is. When we need to access the surplus we bring the set amount in as income at that time. The problem with this is the total amount of surplus income we have aside isn't visible. I would also have difficulty reconciling my accounts. To address this I thought I would open a separate savings account and transfer the money into it so I can keep track of it. This would have to be an off budget account again, but I would transfer the funds back to an on budget account when required as a top-up.
Another possible ideas was that I could budget based on the total income we get and just put more money against categories that will used later. I don't think this will work because then I won't know how much I actually have to spend in that category in any given month. We typcially take holidays in December/January so we will have no income for at least a month during this time, and I need to ensure we have enough budgeted to get us through this period.
I was wondering if anyone else is in this situation where their income is variable and how they handle it. Or if anyone has any better ideas for how I can use YNAB to manage this situation without having to open extra bank accounts.
Many thanks for your advice in advance.
Source: http://www.youneedabudget.com/forum/personal-finance-f9/advice-please-variable-income-t21199.html
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