My new budgeting system will work like this. (There is probably an easier way, but this is how I can understand it easily. Plus, it forces me to slow down because I have to do the math first.)
Example: Contract Income of $1309.40 (this is an average monthly amount from one of my contracts)
- 150.64 ( for HST)
- 231.75 ( 20% for taxes)
= $ 927.01 ( this amount is my working income)
Then I multiply by pre-determined percentages for each of my 4 piles:
80% for cash flow; 10% for Emergency Fund; 5% for Planned Spending; 5% for Long-Term Savings
CF = $741.60 EF = $ 93.70 PS = $46.35 LTS = $46.36
Everything I need to put my money toward falls into one of these categories, or into the taxes that I take out first. This puts me on a strict budget of where my money needs to go. I know that rent, groceries, gas & insurance, and debt payments all have to come out of the Cash Flow. My Emergency fund will get regular contributions from all the fixed and variable income coming in. Planned Spending will fund accounts that are special - Christmas fund, new work equipment, new vehicle fund, house down payment, etc. Long-term savings is just that - saving for my future. When I have a certain amount accumulated, like $250 or so, I can transfer it over into my RRSP Mutual Fund.
I will also apply these percentages to my regular pay cheque once I know how much it is. I have no idea how much will be taken off for deductions, so I will have to wait until the first pay comes in and then budget every other week with that amount.
Who else has variable income and how do you deal with it?