New to Budgeting... Where do I begin?

[Anonymous]

Hello. I'm new to the world of personal finance forums.

I'm planning a career move that would leave me from a salary over to purely commission and the idea of irregular income scares the hell out of me.

One thing I struggle to nail down in my personal finances is budgeting. I always tell myself I'll get around to it eventually and I don't.

What would be a good starting point into learning about the various methods of budgeting based on different types of income?

How much of my income should go to my basic necessities like food and shelter?

[Anonymous]

If you are not using Mint.com I highly recommend getting on that ASAP!!! It will change your life and is the best budgeting tool hands down. It is made for people like you and me who would never get around to it on our own.

One other major thing is to make sure you have an emergency fund. Really everyone should have one although it is crucial if your going to be commission based.

As far as a percent of your income that is impossible to say, housing costs vary widely across the county. I would just try to keep costs as low as possible until you nail down what your income will look like. Also do not overlook utilities, they can be a major factor.

[Appleman]

I would recommend you also look at YNAB. (You need a budget). You can try it for 34 days for free. It is one way to help manage your finances, and there are a lot of quick videos to show you how the system works.

However, the best thing you can do is start something/anything now to budget your money.

Best of luck and let us know what works for you.

[stellar]

Plan for the first 6m-1year to live way below your means and save money (since you're working on commission).

Make a list of all your expected monthly expenses:

rent (shouldn't be more than 30% of monthly income MAX)

utilities/water/elec/cable/internet/gas

health ins/dr costs/prescriptions

car payment/insurance/registration/maintenance

groceries (find a discount grocery store and learn to cook, eat vegetarian to save money)

don't forget occassional expenses like: taxes, gifts, dining out, going out, haircuts etc...

other costs etc etc etc

Then look at your expected monthly income

Make sure you spend less than you expect to make and put a portion in savings.

It can actually be fun to find ways to tighten your expenses and save money.  It can even be addicting.

If you don't like the word "budget", you can call it a "spending plan".

Good luck!

[Kevin86475391]

I used to use Mint and it was awesome as far as what it could do with the data it gathered. However, for me at least, it sucked terribly at gathering that data in the first place. I CONSTANTLY had accounts in error that it couldn't aggregate from...even though I could manually log into them just fine. Plus it had really bad support. I believe the only options were a forum type system and emailing about problems, no customer support # or internet based lived chat. For me this ultimately made Mint a bigger headache than it was worth, even though I really really loved it and found it incredibly useful and valuable when it worked properly. For me I needed it to either ALWAYS work or I needed IMMEDIATE live support when it didn't. But that's just me and my needs in a service, other people are probably a great deal more chill about problems and waiting for support. Plus it's free, so it's not like I had grounds to complain about being cheated or treated badly as a customer.

Anyway, one money tracking system you could use is sort of reverse engineering your budget. Look at and categorize all of your expenses for the past 3-12 months and get an idea of what you're ACTUALLY spending in each category each month. This will be a great opportunity to get a feel for your expenses and will also naturally create opportunities to see where you can cut back. If you do cut back, make it reasonable. Don't try to slash a $600 a month food bill to $300 in the first month. Maybe aim for $500 at first, then if it seems doable shoot for $400 the next month, etc. (Obviously your numbers will vary.)

Savings will indeed be hugely important if you're working a commission only job. Conventional financially conservative wisdom says you need to have an emergency savings totalling at least 6-8 months worth of expenses, and while I think most people can safely get by with a bit less than that if they have stable incomes, YOU definitely should have at least 6-8 months or more of savings given your commission-only situation.

Obviously your personal situation may vary from my experiences but I've worked commission-only jobs before and for me at least it was extremely feast or famine. Sometimes I would take home ridiculously large paychecks other times I'd literally make NOTHING in a pay period. It requires a great deal of discipline. You have to be able to say, "WOW, this paycheck is 3 or 4 times more than I need/expected!" and then do absolutely nothing to celebrate and not spend anything more than you would have anyway...because next week, and maybe the week after, etc., you might literally be looking at no income at all and need that extra amount from a few weeks back.

For me I did commission only jobs when I was young and single with low fixed expenses and lived a very carefree, party-type lifestyle. And it was great for that. But it's absolutely not something I would recommend for anyone with dependents or high fixed monthly expenses. You kinda need to be okay with less stability. But again of course, your job and situation may be quite a bit different, that's just my experience.

[migo13]

YNAB - It's a game changer.

[Anonymous]

The frequency of accounts not linking up has gone down substantially on Mint recently. At one point companies were intentionally blocking access to Mint. As far as support goes though, you get what you pay for there. Things like limited support staff helps them keep it free to use. I do find the support for YNAB interesting though, as I have never heard of it before. Will definitely be checking into it too.

[Appleman]

I had been a long time Quicken user, a great program for tracking expenses and keeping accurate records. I would enter  bills that were coming up and thought that was budgeting. For instance I would have all of my bills and income entered for the next month and SHOULD have had $2000 left over at the end of the month. End of the month rolls around and there is only $500 left. Where did the money go?

I learned from YNAB that this is known as forecasting and is about as accurate as the weather forecast at times. In YNAB the goal is to get you 30 days ahead, using money you earned last month for this months bills. Other posters are recommending that you have months and months of income set aside which is a great goal. You need to set a manegable goal when starting. And some people find starting to budget can bring up a variety of issues and emotions. How can I have this much debt? Do I want to stop living beyond my means?

I can tell you there are a lot of well-educated people on this forum who have not handled their money in a responsible manner but are now taking the steps to educate themselves and budget. The payoff in the future can be enormus if you start a budget today. 

[Anonymous]

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@Appleman wrote:

I would recommend you also look at YNAB. (You need a budget). You can try it for 34 days for free. It is one way to help manage your finances, and there are a lot of quick videos to show you how the system works.

However, the best thing you can do is start something/anything now to budget your money.

Best of luck and let us know what works for you.

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Second YNAB. Good forum over there too. 

[Anonymous]

Thank you for the responses. Based on the opinions I've read, I should reconsider the jump then. I was able to snag a copy of Quicken from a friend, so I will start with that and then go through the information on YNAB and Mint. 

Thank you Kevin. This little nugget of advice really put it in perspective.

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Savings will indeed be hugely important if you're working a commission only job. Conventional financially conservative wisdom says you need to have an emergency savings totalling at least 6-8 months worth of expenses, and while I think most people can safely get by with a bit less than that if they have stable incomes, YOU definitely should have at least 6-8 months or more of savings given your commission-only situation.

Obviously your personal situation may vary from my experiences but I've worked commission-only jobs before and for me at least it was extremely feast or famine. Sometimes I would take home ridiculously large paychecks other times I'd literally make NOTHING in a pay period. It requires a great deal of discipline. You have to be able to say, "WOW, this paycheck is 3 or 4 times more than I need/expected!" and then do absolutely nothing to celebrate and not spend anything more than you would have anyway...because next week, and maybe the week after, etc., you might literally be looking at no income at all and need that extra amount from a few weeks back.

For me I did commission only jobs when I was young and single with low fixed expenses and lived a very carefree, party-type lifestyle. And it was great for that. But it's absolutely not something I would recommend for anyone with dependents or high fixed monthly expenses. You kinda need to be okay with less stability. But again of course, your job and situation may be quite a bit different, that's just my experience.

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Right now, I'm trying to starve off a 5 figure CC debt plus student loans. That affected what I had saved up already so now I have to reconsider.

By your information, I need to be much more apprehensive because the risk is no longer calculated. Thank you for the perspective.

Appleman,

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I learned from YNAB that this is known as forecasting and is about as accurate as the weather forecast at times. In YNAB the goal is to get you 30 days ahead, using money you earned last month for this months bills. Other posters are recommending that you have months and months of income set aside which is a great goal. You need to set a manegable goal when starting. And some people find starting to budget can bring up a variety of issues and emotions. How can I have this much debt? Do I want to stop living beyond my means?

I can tell you there are a lot of well-educated people on this forum who have not handled their money in a responsible manner but are now taking the steps to educate themselves and budget. The payoff in the future can be enormus if you start a budget today. 

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I'm having to ask myself these questions because of the mistake I made starting out of college. My parents didn't prepare me well financially.

Does anyone have any rules of thumb when it comes to budgeting?