budgeting ?

pointsin2016

So, I make a monthly budget at the end of every month for the upcoming month, I know that 9x out of 10 I will always have overtime unless its a holiday or i am on vacation or take a sick day. I get paid Hourly and my question is, how do you all determine your "monthly income"? do you factor in overtime, bonuses, or do you do straight 80 hours ? I am currently doing 80 hours minus my deductions and I don't count the overtime? What would MM do?

julieanne912

For me, I receive overtime during some times of year, and a variable bonus once a month.  Because those two items are variable, I base my budget on my regular 40 hour a week paycheck, after deductions.  I don't bother budgeting for pre-tax deduction items like my HSA or my health insurance because it's not money I ever receive.

When I do receive bonuses and overtime, I consider that "extra" money that I put towards whatever I'm saving up for at the time.... general savings, an item that I can't necessarily cash flow out of my regular check, or towards something like my car insurance premium that's paid every 6 months, or my car registration.

I also budget per paycheck, since I'm paid bi-weekly, versus monthly.  My H is paid on the 15th and the 30th, so we do his budget per month.

labro

I really like what @julieanne912 does. If you don't NEED the OT earnings in your budget, it's nice if you can consider it extra and put it all into a savings related goal. That said, if you're working it consistently and have a good idea of how many OT hours you're working each week, it would probably be easy to figure out an average and go from there. When we applied for our mortgage, they averaged out H's OT over the past 3 years to determine his income. Because he worked it consistently and had been for a very long period of time, they took his OT earnings into account instead of only his base salary.

LillibetteV

pointsin2016 said:

So, I make a monthly budget at the end of every month for the upcoming month, I know that 9x out of 10 I will always have overtime unless its a holiday or i am on vacation or take a sick day. I get paid Hourly and my question is, how do you all determine your "monthly income"? do you factor in overtime, bonuses, or do you do straight 80 hours ? I am currently doing 80 hours minus my deductions and I don't count the overtime? What would MM do?

My husband and I both get OT too, but since it's random we don't count it when we budget. We're in a position to not need it so we treat 100% of OT and bonuses as "extra" and save it all. Our base paychecks, after deductions, is what we use to budget.

kmurphy2131

My husband works 50-55 hours/week, probably 9/10 weeks (the other week is probably 45-50).  That said, he only has a 40 hour/week guarantee.  I budget based on him working 45hours/week.  It makes out budget a little more true to the actual, but if something happens and his hours don't go as high as normal we aren't scrambling for money.  Even with overtime every week, anything could happen and a company could change their policies with no notice. (in my opinion) 

He wasn't happy with that initially, but a lot of his coworkers are stuck trying to work 55 hours a week.  Even though some of them make 150K+, they have grown so accustomed to spending that money that they can't live without it.  He never wants to be "stuck" working that much even if he doesn't have to. 

Eventually I want to live with YNAB's system of living on last months money.  So if we make 7400 in february we live on 7400 in march, if we make 8000 in march we live on 8000 in april.  Then there is never a guessing game.  I don't want to pull that money from my e-fund though because it makes such good interest there, so I am waiting until after we buy a house to start stashing extra money so we can live that way.  Such a simple way to work if you have variable income.

 

csuave

I get 2 paychecks a month during 10 months and 3 paychecks for 2 months.  While the 2 "extra" paychecks aren't the same as OT I kind of treat them that way.  The budget is built off of 2 paychecks per month so when a third comes in it is treated as bonus money.  Usually it is put towards what we are saving for.  Last year we were doing well on our budget and we used an extra paycheck for fun charitable giving like buying tickets to fundraisers and stuff like that.

hoffse

csuave said:

I get 2 paychecks a month during 10 months and 3 paychecks for 2 months.  While the 2 "extra" paychecks aren't the same as OT I kind of treat them that way.  The budget is built off of 2 paychecks per month so when a third comes in it is treated as bonus money.  Usually it is put towards what we are saving for.  Last year we were doing well on our budget and we used an extra paycheck for fun charitable giving like buying tickets to fundraisers and stuff like that.

This is what we do too.  I'm paid biweekly, so two extra paychecks per year.  We use them to fund one of our Roths for the year, so we don't have to save as much monthly for them.

EDIT: Two extra paychecks per YEAR, not per month (I wish!)

kmurphy2131

csuave said:

I get 2 paychecks a month during 10 months and 3 paychecks for 2 months.  While the 2 "extra" paychecks aren't the same as OT I kind of treat them that way.  The budget is built off of 2 paychecks per month so when a third comes in it is treated as bonus money.  Usually it is put towards what we are saving for.  Last year we were doing well on our budget and we used an extra paycheck for fun charitable giving like buying tickets to fundraisers and stuff like that.

Thats what I do for my extra paychecks.I feel differently about overtime for some reason.

KatieCutie05

Well every month H will get atleast 100 from his second job. Its usually around 120 if he just works one day but sometimes he gets 2 paychecks like that. He also gets paid weekly so 4 months out of the year he'll get an extra paycheck.

I have tried the whole -"we'll just put all of that paycheck to debt thing" but ya see we were not super dedicated to meticulously making sure se stayed under budget so it turned into an "overage fund" 20 over here, 10 over here, or the "lets just use your 2nd job paycheck for that 30 item... etc. All that quickly added up and that 100 vanished quickly. Now i usually budget for 100 of it so we dont feel like its extra money. It works out much better that way because we don't feel we have a safety net. 

blondie42107

I receive two paychecks. One for regular pay and one for mileage reimbursement. The first is always consistent since I'm paid biweekly. Travel is dependent on how much I'm on the road. I always budget for my regular pay and consider my mileage (minus gas expenses) as "extra/bonus income" and I list it on a separate line on our excel spreadsheet.

lbonga1

@hoffse Why do you fund a Roth instead of a tIRA? I would assume at your income level you would be making less money in retirement, so wouldn't you save on taxes if you funded the tIRA then started the Roth conversion ladder in retirement?

hoffse

lbonga1 said:

@hoffse Why do you fund a Roth instead of a tIRA? I would assume at your income level you would be making less money in retirement, so wouldn't you save on taxes if you funded the tIRA then started the Roth conversion ladder in retirement?

It's because our incomes will likely go up a LOT once one or both of us partner.  We're both on track for it, and our firms have really high partnership rates for associates.

We may switch to a traditional IRA once that happens, but until then we're sticking with Roths. I actually think our tax rates are the lowest they will ever be, including in our retirement (rates really have nowhere to go but up).

Besides, I sort of view Roths as being similar to an AI vacation.  We can afford to pay the taxes now, so I like to get it out of the way and let it all grow tax-free.  We have over 30 years before we can tap into those accounts, and it will be a nice tax-free cushion.

I also don't like the RMD rules associated with traditional accounts.

short+sassy

I don't get OT for my work.  Well...I guess technically I do...I just rarely have the opportunity to work more than 40 hours/week.

However, my p/t job pays every other Friday, so there are 2 months out of the year that have an "extra" payday.  Like some of the other PPs have mentioned.  I also make money mystery shopping, but it is very random how much/little I make each month so I never include any of that money in my budget..  For my mystery shopping money and "extra" paydays, I just put that extra unplanned for money into whatever my current financial goal is.  Usually, paying down my Home Equity Line of Credit.

If I were you, I'd do something similar with your OT.  It's better to live off of/depend on your guaranteed 40 hours/week, and then use bonus OT money to pay off debt faster and/or build up your savings/retirement.  Then it would be to rely on both your straight and OT income to pay your bills.

A company I worked for 6ish years ago encouraged me to work as many OT hours as I wanted.  Woo-hoo, extra money!  But that was only the first year I was there.  In the second year, as our project started winding down, the policy changed and no OT was allowed.  Fortunately, I never counted on that OT money.  I just socked the extra into my "down payment for a house" savings fund.

dragonstarjk

julieanne912 said:

For me, I receive overtime during some times of year, and a variable bonus once a month.  Because those two items are variable, I base my budget on my regular 40 hour a week paycheck, after deductions.  I don't bother budgeting for pre-tax deduction items like my HSA or my health insurance because it's not money I ever receive.

When I do receive bonuses and overtime, I consider that "extra" money that I put towards whatever I'm saving up for at the time.... general savings, an item that I can't necessarily cash flow out of my regular check, or towards something like my car insurance premium that's paid every 6 months, or my car registration.

I also budget per paycheck, since I'm paid bi-weekly, versus monthly.  My H is paid on the 15th and the 30th, so we do his budget per month.

Ditto all of this.  I budget per paycheck, and I budget based on the amount I KNOW I am going to have in my paycheck.  I don't have the opportunity to earn much overtime but sometimes there will be a couple hours.  Example:  I set my paycheck budget at $800--I know my check will always be AT LEAST $800.  Sometimes its 805, sometimes 820, what have you--but my budget stays at $800.  Since we don't have a separate 'fun money' budget, these little overages would be considered fun money.

Erikan73

I figure mine out based on a regular 80 hour paycheck since overtime and bonuses are not always the same, or guaranteed.