Lurker with a couple questions

lbonga1 · June 2015

Hi, I'm Lauren. I used to be a regular on the Bump before a bunch of nonsense went down. I've lurked here for a short time. Anyway, my question is...how do you budget if you don't have a fixed income every month? For example, if I'm doing work as an independent contractor, I might not always have the same amount of jobs available to me. Would it be best to wait until you receive a paycheck then decide how to divide it up?

Also, I recently left my full-time job, and I realized my bank charges a maintenance fee for my checking account if there is no direct deposit over $250 or minimum daily balance of $1000. I don't want that much extra money just sitting in a checking account, so now I'm trying to figure out what to do. I was looking at a Fidelity cash management account, but how do you deposit cash if you need to? Can you make a deposit at any ATM?

Xstatic3333 · June 2015

Hi, Lauren! My H used to have a variable income, and it made budgeting super tough. What we did was have a budget for his average worst case scenario month, and also kept a larger e-fund than we have now which we would occasionally have to pull from on very bad months since I was in school when he was at that job and making a pretty small income myself. On a good month we could have put the extra to savings goals, although in reality we weren't super MM at that point and usually just spent the extra.

I would definitely ditch any bank that is charging you fees! Shop around a bit. Have you checked with a local credit union? Mine has a free checking option with no minimum balances or required deposits-you just can't get access to the high interest checking account that way.

hoffse · June 2015

Hi Lauren - I think the general advice for your situation is to budget based on a low-to-average month. Then whenever you make more it feels like a windfall.

Plenty of smaller banks don't charge fees. I have a cash management account at Fidelity that I love, but I rarely deposit money into it by check, etc. I usually just move money into that account electronically (tip: there are no fees to do this if you trigger the money transfer from your Fidelity account - I withdraw money from other bank accounts for free by using the Fidelity website). There is a fidelity branch where I live so I have taken checks to them in the past and deposited them in person. I think they also have a mobile deposit feature on their app now, or you can mail the checks in to be deposited. Do NOT try to deposit at a random ATM. Fidelity will let you withdraw money at any ATM for no fees, but they don't have any ATMs that they actively monitor for deposits.

If you receive a lot of paper checks and there isn't a Fidelity close by, I would look for a smaller regional/local bank. If you are primarily paid by direct deposit with only the occasional paper check, I would probably do Fidelity because their customer service is excellent, and you can open other kinds of accounts with them and have everything run through a single bank. All accounts you have with them show up on the same screen, and it's just easy to keep track of it. I have an account at Wells Fargo that I would LOVE to close, but H gets reimbursements by paper check 2-3 times per month, and our Fidelity is on the other side of the city and only open M-F. That is just inconvenient enough that we need to keep the WF account active until his employer switches over to direct deposit reimbursements.

blondie42107 · June 2015

I can't help with the budget part because our household income is pretty consistent. However I would definitely look for another bank. We use a credit union (no fees!) and another local/regional bank that offers free checking.

Good luck and welcome!

MommyLiberty5013 · June 2015

Many banks offer Mobile banking, which means you take a picture of your checks with your Smart Phone and deposit them without ever going to a bricks and mortar location. Cash is the only down side.

If you or someone like your DH or another family member is a retired, active, or honorable discharged U.S. military member, any branch, regardless of rank, you can check out USAA. They offer free checking with mobile apps. Since they do not have physical locations, they do have a plan by which you can go to any ATM and they will refund you any ATM fees (for when you withdrawal cash) a certain number of times per month. Obviously they only downsize is if you needed to deposit cash, which they cannot help with.

vlagrl29 · June 2015

we both have variable incomes as well and budget for the worst case scenario month. I set a budget up every year and know exactly how much we need in our checking to make it happen, then I tell DH about it so he knows what bare minimum he needs to bring in. It works out well so far for us.

lbonga1 · June 2015

Thanks for the advice, everyone. I'll definitely look into a credit union. I also thought of another question. For Dave Ramsey's method...he suggests saving $1000 before snowballing debts. So, while you're saving that $1000, do you just pay the minimums on credit cards, loans, etc.?

MommyLiberty5013 · June 2015

lbonga1 said:

Thanks for the advice, everyone. I'll definitely look into a credit union. I also thought of another question. For Dave Ramsey's method...he suggests saving $1000 before snowballing debts. So, while you're saving that $1000, do you just pay the minimums on credit cards, loans, etc.?

I'm not a DR follower, but my guess is, yes you pay just the minimums while saving for the $1k. If you don't pay the full minimums due, then you get charged fees and it dings your credit.

vlagrl29 · June 2015

We are with community america and have had no issues with them. we were with commerce bank before since I was 17, but the high interest savings at the credit union is hard to beat.

simplyelise · June 2015

For DR: You do pay the minimums while you are saving the $1000. Also, if you're not current on any bills, you get current before focusing on the $1000.

PP's have given good suggestions for budgeting on your low average. The other option is to build up your checking with 1 month of expenses then you start to budget for July using only money you earned in June. The You Need a Budget app/site has this as a recommended step for money management. It doesn't make sense for everyone, but I think it would be great in your situation.

Dave Ramsey's irregular income budget form might also be a good place to look. It suggests that you list out first your needs (rent, food, utilities, gas, debt payments) and as money comes in, you assign it down the list of importance. The further you get down the list, the less "need" and more "want" ie: date night, clothes, toys for kids. Some months you get to fund everything on the list, some months you only cover basic needs.

brij2006 · June 2015

Our income varies from month to month as well, and we use Dave Ramseys' irregular income budget to start. Now that we've been budgeting for a year and a half we've been able to do a normal budget and just account for our irregular income.

Even though or mortgage isn't due until the 30th of each month, we budget and pay it at the 1st. Since it's our #1 priority to pay. After that, we pay the utilities. Then we pay for food, then it's gas, and finally debt payments. Pretty much all of our bills are paid by the 15th of the month, then after that we use the money for any extras plus debt payments. It's the best way to ensure you will continue to have a roof over your head and food on the table. Especially with an irregular income.

lbonga1 · June 2015

I had not heard of his irregular income budget. I'll take a look, thanks!

dalm0m · June 2015

When I first opened my own business, I figured out how much I needed to support the business and live each month. I tried like the Devil to earn at least that each month. I also saved like a hoarder to get 6 months of expenses in an account, just in case.

Once that was done, as some of my projects got larger with longer lead times (meaning more time between getting paid but larger pay offs) I upped the savings e-fund to 1 year of expenses but still worked to make the minimum. If I had to dip into the funds or float things on CCs, I paid off the cards first then paid myself back. When I got windfalls, I'd buy big ticket items like a new car paid in cash. Last month I earned my kitchen renovation budget so the contractors are coming now.

I also learned some new skills including cooking, home repair & the art of looking professional while shopping at thrift stores.

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