The Road to Black: Creating a Budget When You Don't Know Your Income

My husband recently took a new job with a modest raise. We are not eligible for health insurance for 90 days, so that expense won't come out of our paycheck until around January. They pay biweekly on a schedule offset from his previous job's schedule, which means his first paycheck was for only half a pay period.

It will be nearly two weeks before we know what his take-home pay will be.

How do you create a budget with that kind of uncertainty? Simple: you estimate.

I multiplied the one-week check by 1.8 to estimate the amount of the normal two-week check. Why 1.8 instead of 2? Because most payroll software calculates taxes on the amount of the check, not the annual income, so a bigger check will have a larger amount of tax deducted. I think this is a conservative approach.

The resulting November budget does not put much toward our debt snowball. On the other hand, that is because a great deal is being saved for various anticipated expenses: Christmas, the HOA fee (due January 1), vehicle registrations (both due in January), tire repair or replacement for one vehicle which keeps going flat, and doctor visits (I mentioned we won't have health insurance for 90 days, didn't I?). If our income estimate was low, we can take from one or more of these categories, and replace it in next month's budget. If the income estimate is high, we can add more to the debt snowball.

I hate the uncertainty of not knowing what our take-home pay will be. But there is no reason why we can't create and live on a zero budget in the mean time.

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Kacie · 855 weeks ago

That makes sense to me! And, it won't take long for you to get that first full-sized check. My husband gets paid monthly, so that first month, not only were we broke, but we had no idea what his net pay would be. Plenty of deductions for taxes and benefits.

My husband's net pay is about 63% of his gross pay, for example.

1 reply · active 855 weeks ago

Ginkgo100 38p · 855 weeks ago

Yes, it is amazing how much is taken out for taxes and benefits. We'll have to rearrange our budget when we are eligible for the health insurance. I don't know any of the plan details yet. For now, the challenge is not to get too accustomed to a certain paycheck amount so that when we start taking out the health premium, there is no sticker shock.