Let me Try to Explain

Wednesday's post had a couple of questions left in the comments section that I should address. I will try to explain our situation as best as I can.

I am self-employed, running my own transportation company that is specific to the funeral industry. I have a contract with a medical company. I think of this contract as my 'main job'. For reasons unknown to me, this contract has always been paid for yearly, in advance. The contract year runs from June 25th of one calendar year, to June 24th of the following calendar year. It is paid in the late spring of every year.

Think of a full-time working persons salary or wage. Example: Joe is a custodial engineer who earns $36,000/yr before taxes; Jill is a administrative assistant who earns $45,000/yr before taxes. This contract would be my 'full-time' job. The company is paid $XX,000 per year. I have to budget for the year, including taxes and the operating costs of the business for an entire year with this money. Instead of giving myself a weekly or bi-weekly wage, I take out the amount we will need to cover our rent for the entire year, along with a few other smaller amounts for other goals. This is set aside in a separate account to use for rent, or, like now, we need to borrow some money for a specific thing (lawyer retainer).

At any given time, I can check the account to see how much is there, and figure out how much rent we have left to pay until May 30 th, when the next contract should be paid.

Rent will cost us $959 x 3 months = $2877
Rent (with increase) $965.71 x 8 months = $7725.68
Total Rent needed: $10,602.68

Account Balance for Rent $8862.00

Shortage of $1,740.68

To answer your question Carla, yes, I have a certain number of  months of rent already set aside, and then continually add to it as money comes in. As it stands right now, I have enough in the account to pay each month's rent until March 30th, 2012. If I were to borrow the $3500 needed for the retainer, I would have enough money in the account to pay rent until November 30th, 2010 ( and more than half of December's rent). then I would have a shortage of $5240.68. I would have to add $873.45 monthly to this account for the next 6 months to cover the shortage.

Clear as mud, yes?

Over the past couple of years, I've learned that we can pare down our expenses on everything else, and live with so much less. Not being able to pay the rent is something I am most certainly NOT comfortable with! If we pay our rent later than 14 days after it is due, the management company files with the Landlord and Tenant Board for a Eviction Hearing, and another $170 gets added to the rent amount for the filing fee. Because I used to be so bad with money, this was almost a monthly expense. We will never be able to save for a down payment if we keep giving our money away like that. that being said, we are so close to having many things paid off that will free up additional funds to add to this account, I think we can swing it.

Good things this week:
- getting bills paid
- opening a bank account for DD2

Not so Good things this week:
- paying bills
- finding a double charged debit transaction on Hubby's account