How We Learned to Budget With an Irregular Income
In the LearnVest Personal Stories series, everyday people share the details of their money lives, discussing the individual choices they’ve made and how it’s impacted their financial journey.
Today, one woman explains how her family learned to budget—even when one of their incomes could vary drastically from year to year.
Our family defines the concept of “inconsistent income.”
I am an attorney who brings home between $70,000 and $80,000 per year (pretax), depending on my yearly bonus. My husband, John, is an independent contractor in the oil and gas industry, and there is nothing consistent about his job. We never know if and how much he is going to work, where the work will be or how much he will be paid—that’s just the nature of his project-based industry.
I knew this was my husband’s chosen career path when we were married in 2010, but it’s still hard. We can’t plan ahead, which is especially tricky considering that we have a 2-year-old son. We can’t set a consistent budget. We can’t wrap our arms around anything tangible to make financial stress of not knowing what the future has in store for our family go away. It’s not easy to create a budget when the “John’s income” box is filled in with “???.”
When I used to read articles encouraging readers to budget, I always wanted to scream, “I can’t!”
At least I did until we found a solution that seems to work for us.
The Trouble With Planning Ahead
In 2010 John worked a solid nine months. That was a great year for our family: We collectively brought home $125,000 before taxes. The next year, we brought home $114,000. In 2012, however, things slowed down for John. He started off the year with a project, but it was short-lived. Our total income dropped to $75,000. 2013 was also nothing to write home about—we took home $80,000 this year.
2014 is shaping up to be another big year. If John’s new project lasts through the end of the year, our income will be about $140,000. He’s constantly looking for part-time work in other fields, but he tries to be upfront about the fact that he may have to leave on short notice if an oil and gas project opens up. This doesn’t interest many prospective employers, and we both understand why.
While our income fluctuates greatly, our expenses are pretty much fixed. It costs us about $45,000 per year to live our current lifestyle in a small town outside of Cleveland, including day care, groceries, gas and utilities.
Fortunately the only debt we carry is our mortgage, and we are covered on my law firm’s health insurance. John could probably find a more stable job in a different industry, but he loves his career. He also never finished college (he is about a year away from having his bachelor’s degree), and while the oil and gas industry is flexible toward education, other industries would likely require a degree for any similarly salaried positions. Plus, there’s the opportunity for him to achieve a highly in-demand salaried position, provided he continues to work as a contractor and gain experience and connections.
In years past we frequently dipped into our savings account in order to maintain our lifestyle from the “big” years. We would tell ourselves that we would pay it back when John got another project, but somehow sticking to that plan was hard. We ate out frequently. We had a premium cable package, plus Netflix. We vacationed frequently without really sticking to a budget. While we didn’t go into debt, we burned money from our savings account without really knowing where it went.