So you figured out how much money you are actually making with your regular job. Great! Let’s say you bring home $1,000 every two weeks. Wonderful. I like nice, round numbers to work with. 😉
Now what about all these little odd and ends that come in to the household every now and then? You’ve gathered them all up. Now what do you do with them?
Well, let’s say you consistently get a child support check from your ex every month. He’s supposed to pay you $500 a month. Once in a blue moon, he hits the mark. But sometimes he pays you $300, sometimes he pays you $425, sometimes $250. It varies. What do you do then?
Well, there’s two ways you can handle this.
First, you could average out the last six months of payments (add them all up and divide by six). So let’s say for the last six months, you received $500, $400, $450, $325, $350 and $500. That adds up to $2,525. Divide that by six and you get $420.83. On average, that is what you receive in child support and what you can figure in to your budget.
But what about those months when he gives you $325 or $350? If you budget $420, you’ll fall short those months. So what I like to do is go with the least amount he’s been known to give you. I would put an income of $325 in your budget. Every month. Because that is the smallest check he has ever given you and you know you can count on at least that much. Anything above that would be bonus income for you.
I would do this with any extra income that comes in on a regular basis. Let’s say you get a mileage reimbursement from work every month. You can average that out over the last six months, and go with that average for your budget. Or you can use the lowest amount you have ever received. Or you could not include it at all, and it would come as discretionary income for you to use as you please.
Any extra income you have, that comes in on a regular basis, do this with. If you have income that you sometimes get, but not always, don’t count that. That will be discretionary income, and we will talk about that later. Discretionary income could be things like dividend checks, credit card “cash back” bonuses, Christmas bonuses, insurance premium reimbursements, garage sale profits, etc.
What if you receive government assistance, such as food benefits, cash assistance, medical assistance, or heat assistance? Well, the heat assistance goes directly to your vendor, so let’s not include that. The medical assistance also goes directly to the hospitals/clinics, so we won’t count that either. Unless you receive an insurance premium reimbursement check. We would want to count that. The food benefits you could count as income, or you could just lower your food expenses by that amount. We can talk more about how to do that when we talk about expenses. Cash assistance, since it is actual money you receive though, should be counted in the income side of the budget.
So let’s say you receive $1,000 from work, $325 from your ex and $400 in food benefits. This is your income. You make $1,725 a month. That is what you bring home and can use for your expenses. Or, how I would do it is leave the $400 in food benefits out and just count the $1,000 and the $325, for a total of $1,325. It’ easier to work with, and then I’d just lower my food expenses by $400 every month. (Say you typically spend $800 on groceries. I’d only add $400 of that in to my budget because I know food benefits covers the other $400).
It’s a lot of work to figure out your monthly income, isn’t it? But congrats! You got it! Now let’s meet back here to figure out what to do next!
And for those of you who are self-employed, we will talk about that next time as well.