Creating a Budget When You Don't Know Your Income

Posted by Ginkgo100 | 10:09 AM

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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