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budgeting when incomings/outgoings vary alot(5 Posts)
Anyone got a good system for budgeting when you're sef employed? DH and I own our own business and income varies week to week and year to year. Business outgoings also vary. We could probably base income on last years takings but business costs would be more difficult. For example at the moment we are trying to get caught up with paying a couple of our suppliers so paying more than we would have been paying last year. Whenever i try and pull together a personal budget i come unstuck trying to decide how to approach it.
My dad does our business accounts at the minute so they are taken care of but that gives us figures retrospectively so doesn't help me work out how much money we've got for personal drawings. We have some (personal debt) which are want to pay off as a priority but its difficult to workout anykind of meaningful budget.
I'm not sure about the business side of stuff but for personal income - can you budget for a minimum income and then anything over that could be saved for the quiet months?
My DH is SE as well so I fully understand, we have debts from the quiet months as well... but we try to budget on a minimal income and save any extra income for when work is low. It's not foolproof as we have has some unexpected quiet spells or SHTF months but we can roughly manage. The other thing we have is an overdraft which helps when income is erratic...
just thinking what else we do - we have minimal direct debits - literally just the bills plus prescription card and contact lenses (though I'm plucking up the courage to wear glasses only) and then we use cash for everything else. It makes us focus on the budget - no cash? can't have it..
I put away x amount of cash a month which is then divided for yearly costs such as insurance plus we try and put a little aside for Birthday/ Christmas (& our lists are drastically reduced to immediate family and a couple of v close friends, only the kids get big (within reason) gifts, everyone else limited to £5-15).
It only works if both of you are in agreement and stick to it! DH often sees "money in the bank" = I can spend - he's laid back and thinks "flexible friend" rather than "omg no money" like I do! Hence why he has a cc of £2k and I don't have a cc at all.... (other day he said "I've been very good, not put anything on the cc for 2 months", couldn't understand my snarky reply of "I've not put anything on the cc for several years!") It's hard work but I'm getting him round to my way of thinking slowly........(!)
We do an income forecast for the year, and then average it out allowing for 3 months of no income.
Then we deduct all business expenses and draw out up to 70% of what is left, leaving the rest to cover unexpected expenses and to cover lean periods.
Having said that, our business costs are fairly static.
This approach means that we are able to cover DH being out of work for a month or two without any issues - and we always have enough to cover 4 months minimum of full outgoings without having to cut back.
Separately to the money that we leave in the business, we also save for Christmas and birthdays, holidays, pensions, regular car expenses, plus a fund to cover replacing broken household items/house repairs.
We don't buy anything on credit, even cars. If we have the money without having to dip into any of those savings pots then we can have it, if not then we wait. Because income is unpredictable you can never be sure that you will be able to make the repayments on a loan or cards.
Ooh you lot are efficient. We do "hey we've got money in the bank, lets spend it" and "eek running out, stop spending".
But I totally agree with not buying anything on credit (except the house). And I tend to buy christmas presents etc throughout the year when I see stuff, so if December turns out to be a lean month we're still ok.