One of the most common excuses I get for people who tell me they “can’t budget” is that their income varies from month to month. Sometimes I hear it from someone who gets paid hourly and sometimes works overtime. Sometimes I hear it from someone who is a commissioned salesperson.
Sometimes I hear it from someone who owns their own business and gets paid based on business profits. These are three extremely different situations, but the approach to budgeting is actually pretty similar. Let’s break it down. Before we do, though, let me say one thing about those who are self-employed or partially-self-employed.
You must keep your business and your household finances separate. Even if every penny you earn comes from your small business and you are the only employee, keep good records and keep things separate. As you pay yourself a salary, make record of this. This good recordkeeping is the only way you’ll truly know how your business is performing and allow you to make a household budget.
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Learn additional facts on employment law if you are preparing to hire employees. For you…and everyone else on a varied income, here’s how I recommend to do your budget: [Read more…]