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."

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Welcome to the Enjoy More 30s: Family Finance

podcast, the only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

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

from simply enjoying life.

Hello, and welcome to Enjoy More 30s: Family

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

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

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

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

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

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

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

there, whether it be self-employed entrepreneur, an

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

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

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

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

regularly occurring monthly pay for yourself.

Ants are wonderfully amazing and at the same time amazingly

irritating creatures. There is no other creature out there that

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

Millions of these little worker ants are out everywhere all the

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

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

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

northeast, these little creatures store so much food

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

entire winter below ground. Now most people out there are

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

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

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

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

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

somehow know how to slowly distribute it out to themselves.

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

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

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

food.

So what you need to know is people with large fluctuating

incomes tend to have this same distribution problem to deal

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

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

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

people in my profession. This requires extra planning,

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

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

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

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

after the last quarter? All these questions become

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

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

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

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

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

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

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

l int

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

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

call it the bucketing approach to budgeting. First have all

your various forms of irregular income flow into one bank

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

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

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

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

account send a fixed amount every month to your checking or

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

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

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

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

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

over to your checking or spending account, bucket two,

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

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

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

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

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

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

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

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

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

variable income that I received.

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

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

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

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

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

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

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

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

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

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

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

a huge additional point.

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

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

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

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

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

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

ways better than others. But ny salaried employee gets p

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

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

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

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

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

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

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

tuation.

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

that irregular income is definitely more challenging of a

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

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

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

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

matches what your monthly expenditures are. Third is to

calculate out how much you actually need to live on each

month, and set the transfer to occur automatically from one

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

whether it's quarterly or annually, whatever works for

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

account to hopefully invest a sizable portion towards yourself

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

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

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

simplifying your irregular cash flow removes anxiety, stress and

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

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

more enjoyable for you.

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

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

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

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

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

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

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

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

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

literally millions of young American families out there I'm

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

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

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

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

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

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

forward to connecting with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

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

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first, Joseph affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS securities Inc. and TFS advisory services an SEC

registered investment advisor member FINRA/SIPC.