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Make Irregular Income? Have Regular Pay | Series 2.7
Episode 726th April 2021 • Enjoy More 30s: Family Finance • Joseph P. Okaly
00:00:00 00:09:29

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If a large part of your income is variable, commission, or bonus derived, you can actually turn this into a much more manageable, monthly, systematic paycheck to yourself.

  • The bucketing approach to budgeting (03:33)
  • Systematizing your income (04:22)
  • Monitor your all income account as it builds up (05:34)

Quote for the episode: "And since you're paying yourself this fixed amount, your spending doesn't change with your income."

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC. TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300

Transcripts

Voiceover Audio:

Welcome to the Enjoy More 30s: Family Finance

Voiceover Audio:

podcast, the only podcast dedicated to making life more

Voiceover Audio:

enjoyable for young families by hitting on the financial topics

Voiceover Audio:

that tend to weigh on us, stress us out and distract our focus

Voiceover Audio:

from simply enjoying life.

Joseph Okaly:

Hello, and welcome to Enjoy More 30s: Family

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Finance. This is the seventh episode in the "Your Money

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Multiplier" series, which is entitled "Make Irregular Income?

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Have Regular Pay". This is actually an addition to what I

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had planned to cover this season, but when I thought of

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this topic, I was just really excited to share it. I feel like

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it could really help a lot of people, that I just wanted to

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make sure I fit it in now. If you're like a lot of people out

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there, whether it be self-employed entrepreneur, an

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individual in some kind of a sales profession, or you just

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have a large part of your income that's bonus derived, we're

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going to cover what you need to know when it comes to organizing

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how your income flows. And what you can do to turn that into a

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regularly occurring monthly pay for yourself.

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Ants are wonderfully amazing and at the same time amazingly

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irritating creatures. There is no other creature out there that

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I have such a combination of respect and also disdain for.

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Millions of these little worker ants are out everywhere all the

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time gathering food, and they don't care if that foods in your

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house, they don't care if it's at your picnic, they will keep

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coming no matter how many of them you get rid of. Up in the

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northeast, these little creatures store so much food

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throughout the warmer season, that they're able to survive the

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entire winter below ground. Now most people out there are

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probably familiar with Aesop's Fable of The Grasshopper and the

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Ant, which goes off of this kind of work ethic that the ants

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have. So it's very well known, it's not just me. What the fable

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doesn't cover, which is so impressive though, is how these

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tiny creatures have, you know, this huge glut of food, yet

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somehow know how to slowly distribute it out to themselves.

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I'm sure if they could get monthly shoprite deliveries,

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that'd make everything a lot easier, and they probably

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wouldn't be such a pain during the warmer months taking all the

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food.

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So what you need to know is people with large fluctuating

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incomes tend to have this same distribution problem to deal

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with. But instead of food, it's money. And I am one of those

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people, the way my personal income works. Almost all of my

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income gets paid to me quarterly, as it is for most

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people in my profession. This requires extra planning,

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however, in managing my monthly income. My mortgage, cell phone

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and everything else that you have, needs to be paid monthly.

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So I have to spread income out over the whole quarter. How much

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did I spend? How much did I save? How much do I have left

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after the last quarter? All these questions become

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problematic very quickly. In addition to that, there's much

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more of a likelihood to spend whatever comes through the door.

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You know, you go to a restaurant- if they gave you 10%

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less on your plate, you'd probably still finish it you

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know either way, 10% less or 1 % more. Whatever you have in fro

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t of you, there's a higher chan e of consuming it. So money's t

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e same way- make more, spend mo e is kind of an easy trap to fa

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l int

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What you can do, though, is convert your irregular income

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into regular pay. And it's actually pretty simple to do. We

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call it the bucketing approach to budgeting. First have all

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your various forms of irregular income flow into one bank

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account. So this is bucket one, and we call it the "all income

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account" because all your income flows into it. So you have

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bonuses, commissions, whatever they might be, they all flow

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into this all income account- bucket one. Next, have this

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account send a fixed amount every month to your checking or

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whatever spending account that you have- this is bucket two.

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You just systemized your income. So as an example, let's say you

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received $35,000 this quarter. This would go into your all

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income account- right, bucket one. If you need let's say

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$10,000 a month for all your expenses, you have this push

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over to your checking or spending account, bucket two,

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automatically every month. So first of the month $10,000 comes

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over, second month $10,000 comes over, first day of the third

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month $10,000 comes over. So you now are systematizing your

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income- you receive $10,000 every month. And now you also

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know that you have an extra $5,000 that you can do something

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with, right? Okay, I received $35,000 this quarter, I know

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that my systematic, that I have set up to move over to my

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spending account, is 10,000 every month. So 10,000 times

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three is 30, I know that I still have an extra $5,000 from this

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variable income that I received.

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This works great for monthly amounts too. If I make $15,000

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one month, then $7,000 next month, then $10,000 the one

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after that. Again, you can always have this income,

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whenever you receive it, go into this all income account- so that

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first bucket. And then again, just carrying over from the

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previous example, if there's that set $10,000 a month that's

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delivered to me on the first of the month, or whatever date you

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want, when you see that money then build up in your all income

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account, you can siphon it off, add it to your investments,

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spend it on a special project. And since you're paying yourself

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this fixed amount, your spending doesn't change with your income,

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a huge additional point.

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You're essentially turning your elf into your own business s

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ructure. So just stop or a second and think about a

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y business out there. Ther is no company that earns exact

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y the same every single month. So think of the company you

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re working for right now. T ey don't bring in the same

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xact amount of revenue every ingle month. Some months are a

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ways better than others. But ny salaried employee gets p

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id the same exact amount every onth. So the business is doing

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the same thing. They have a ariable income that goes into th

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s all income kind of account, eople get paid out every month

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are fixed salaries, and the oney left in the account at t

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e end is the additional profit So you're just rearranging

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ourself to work how every busine s pretty much out there wo

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ks, and how it makes sense for t em to handle this same exact s

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tuation.

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So as a recap of the episode today. First is to acknowledge

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that irregular income is definitely more challenging of a

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problem. The second is to set up your two buckets to handle it,

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though. Your all income bucket, so bucket number one, to receive

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all the various income. And then a checking or spending bucket,

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so bucket number two, to receive a fixed amount every month that

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matches what your monthly expenditures are. Third is to

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calculate out how much you actually need to live on each

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month, and set the transfer to occur automatically from one

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account to the other. Lastly, make sure to look regularly

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whether it's quarterly or annually, whatever works for

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you, for the amount that's building up in your all income

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account to hopefully invest a sizable portion towards yourself

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to help you get closer to your goals. But also to any other

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special expenses or goal items that you might have that, you

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know, vacations or you know, things of that nature. Greatly

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simplifying your irregular cash flow removes anxiety, stress and

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cash flow work on your part, which frees up the mental

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energy, and now extra all income account resources, to make life

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more enjoyable for you.

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Thanks for tuning in today. As always, if you are able to

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implement what we cover, then that is fantastic. You have less

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to worry about than before and can focus more on just, you

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know, enjoying life. If you are wanting help with these things,

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though, or have questions you need help in clarifying, check

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out the 'Ask Joe' section on the show's website. That's www.

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enjoy more 30s .com, that's enjoy more three zero s .com.

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And if you enjoyed this episode, please make sure to follow and

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review us on Apple podcasts or wherever you listen. There are

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literally millions of young American families out there I'm

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trying to reach and help just like you. The next episode is

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the last of this season of "Your Money Multiplier" and it's

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titled "Stock Option Mayhem!", where we're going to cover how

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you can make sense of all those restricted stock, stock options,

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stock purchase plans and so forth into a plan that can most

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benefit you. Thanks as always for tuning in, and looking

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forward to connecting with you again soon.

Voiceover Audio:

The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer or other professional before acting upon

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any content or information found here first, Joseph affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS securities Inc. and TFS advisory services an SEC

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registered investment advisor member FINRA/SIPC.

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