Calling all Freelance/Paycheck couples...(wall o text, sorry!)
February 4, 2014 8:06 AM Subscribe
How do you budget?
My wife and I are struggling, financially. Since 2008, after my father died, I've been on a roller coaster professionally:
1. Laid off from job I was at for 9 years (late 2008)
2. Hired by vendor/major co. I worked well with (full time/early 2009)
3. Fired (Aug. 2009)
4. Unemployment (4 mos. into 2010)
5. New job out of state (full time, 400 miles away/commute back home every other weekend/absolutely horrendous work environment/shit boss, etc.) for 18 months
6. Laid off (July 2011)
7. Unemployment (4 months)
8. New job (November 2011/contract) - so-so, smaller firm, no project management and kind of clueless manager, doable. Potential of going perm
9. Contract abruptly ends Dec. 2012 due to cut backs.
10. Unemployment (3 mos.)
11. New job (Mar. 2013) - learn new stuff, boss is cool, like a lot. Hope to go perm 6-8 mos.
12. NOW - contract is looking to be up end of March; no perm position. Had good interview within company last week, should get an offer...but, i've been wrong before.
While this is going on, my wife has been trying to get her freelance copywriter/marketing career off the ground. In 2009, the boutique ad agency she worked at closed it's doors due to burn out of the Principal. My wife worked there straight out of college for 20+ years. She was the Principal's right hand person, so to speak. She made low six figures for 10 years, easily. After five years (this week) she's barely making it. She made 25K last year. She has no website, but I'm trying to get her to sit down and work with me on a Wordpress site. I'm learning a little about everything about websites.
We have one son, own our house (bought on two good salaries back in '04) and have paid off our two cars. Due to my lifelong bad relationship with money I've (and we) have squandered boat loads of cash. I even went tapped out my rollover IRA. It was a totally conscious mistake on my part and I've been beating myself up ever since. I work up in a cold sweat after it ran out a few months later when i realized we had no reserves. It was 50K?
We both have checking accounts with the majority of the bills coming out of my account. She pays mainly for groceries and clothes for our son (too much if you ask me, but whatever) and private school tuition. Getting rid of private school is not an option due to the city we live in and their school system. My son is involved in AAU sports and other rec leagues.
NOW...the question: How do I budget with this type of set up and given what you know of this situation. I get paid every two weeks but could be unemployed in a month. She gets paid...i don't know when. Sometimes it rains, other times...nada. Feel free to email my throwaway: perhapsima@gmail.com. Thx.
My wife and I are struggling, financially. Since 2008, after my father died, I've been on a roller coaster professionally:
1. Laid off from job I was at for 9 years (late 2008)
2. Hired by vendor/major co. I worked well with (full time/early 2009)
3. Fired (Aug. 2009)
4. Unemployment (4 mos. into 2010)
5. New job out of state (full time, 400 miles away/commute back home every other weekend/absolutely horrendous work environment/shit boss, etc.) for 18 months
6. Laid off (July 2011)
7. Unemployment (4 months)
8. New job (November 2011/contract) - so-so, smaller firm, no project management and kind of clueless manager, doable. Potential of going perm
9. Contract abruptly ends Dec. 2012 due to cut backs.
10. Unemployment (3 mos.)
11. New job (Mar. 2013) - learn new stuff, boss is cool, like a lot. Hope to go perm 6-8 mos.
12. NOW - contract is looking to be up end of March; no perm position. Had good interview within company last week, should get an offer...but, i've been wrong before.
While this is going on, my wife has been trying to get her freelance copywriter/marketing career off the ground. In 2009, the boutique ad agency she worked at closed it's doors due to burn out of the Principal. My wife worked there straight out of college for 20+ years. She was the Principal's right hand person, so to speak. She made low six figures for 10 years, easily. After five years (this week) she's barely making it. She made 25K last year. She has no website, but I'm trying to get her to sit down and work with me on a Wordpress site. I'm learning a little about everything about websites.
We have one son, own our house (bought on two good salaries back in '04) and have paid off our two cars. Due to my lifelong bad relationship with money I've (and we) have squandered boat loads of cash. I even went tapped out my rollover IRA. It was a totally conscious mistake on my part and I've been beating myself up ever since. I work up in a cold sweat after it ran out a few months later when i realized we had no reserves. It was 50K?
We both have checking accounts with the majority of the bills coming out of my account. She pays mainly for groceries and clothes for our son (too much if you ask me, but whatever) and private school tuition. Getting rid of private school is not an option due to the city we live in and their school system. My son is involved in AAU sports and other rec leagues.
NOW...the question: How do I budget with this type of set up and given what you know of this situation. I get paid every two weeks but could be unemployed in a month. She gets paid...i don't know when. Sometimes it rains, other times...nada. Feel free to email my throwaway: perhapsima@gmail.com. Thx.
My situation is not so similar but my budgeting setup could work in your situation very well.
I have a checking account that all my income comes into.
I have a "budgeted stuff" account.
I have a "spending money" account.
I have a savings account.
I have a budget spreadsheet that lists off all my regular predictable expenses. This includes monthly things (gas bills), annual things (car insurance), and even less common things (replacing my car every 10 years). I calculated how much I need to set aside every month to cover these bills. I have an AUTOMATIC bank transfer from my income account to the budget stuff account. All my auto bill pays come from this account.
If it's not in my budget it can't come out of this account.
I allow myself an amount of spending money every month. That is automatically transferred into the spending money account. This is money I can spend on food, clothes, coffee, and frivolous nonsense. If there is nothing left in this account then I am spending nothing and eating lentils from the cupboard.
Anything left in the income account at the end of the month gets moved to savings.
If I had a month where income was not enough to cover the budgeted stuff and the spending money I would draw down from savings.
posted by emilyw at 8:29 AM on February 4, 2014 [2 favorites]
I have a checking account that all my income comes into.
I have a "budgeted stuff" account.
I have a "spending money" account.
I have a savings account.
I have a budget spreadsheet that lists off all my regular predictable expenses. This includes monthly things (gas bills), annual things (car insurance), and even less common things (replacing my car every 10 years). I calculated how much I need to set aside every month to cover these bills. I have an AUTOMATIC bank transfer from my income account to the budget stuff account. All my auto bill pays come from this account.
If it's not in my budget it can't come out of this account.
I allow myself an amount of spending money every month. That is automatically transferred into the spending money account. This is money I can spend on food, clothes, coffee, and frivolous nonsense. If there is nothing left in this account then I am spending nothing and eating lentils from the cupboard.
Anything left in the income account at the end of the month gets moved to savings.
If I had a month where income was not enough to cover the budgeted stuff and the spending money I would draw down from savings.
posted by emilyw at 8:29 AM on February 4, 2014 [2 favorites]
YNAB
Track every penny that goes in and out; work to pay down debts and live off of last month's income. Budget for every predictable, but unknown, expense (including car insurance deductibles, health insurance deductibles, new clothes, etc), and have an emergency fund for unpredictable unknown expenses. Given your employment situation, I would save up an emergency fund of 6-12 months expenses.
But, until you figure out where every penny of your money is going, you will not be able to get ahead.
Check out /r/personalfinance for many many threads on this theme.
posted by melissasaurus at 8:48 AM on February 4, 2014 [3 favorites]
Track every penny that goes in and out; work to pay down debts and live off of last month's income. Budget for every predictable, but unknown, expense (including car insurance deductibles, health insurance deductibles, new clothes, etc), and have an emergency fund for unpredictable unknown expenses. Given your employment situation, I would save up an emergency fund of 6-12 months expenses.
But, until you figure out where every penny of your money is going, you will not be able to get ahead.
Check out /r/personalfinance for many many threads on this theme.
posted by melissasaurus at 8:48 AM on February 4, 2014 [3 favorites]
Dave Ramsey has a great system (complete with worksheets) for budgeting on an irregular income.
Essentially, you prioritize your monthly expenses. Housing, utilities, basic food -- stuff like that gets paid first. If you have more income in a month, you can go down the list and pay lower-priority stuff, or save it for an irregular expense (like semiannual car insurance), or save it for a time when your check(s) may not even cover the critical stuff.
posted by payoto at 9:01 AM on February 4, 2014
Essentially, you prioritize your monthly expenses. Housing, utilities, basic food -- stuff like that gets paid first. If you have more income in a month, you can go down the list and pay lower-priority stuff, or save it for an irregular expense (like semiannual car insurance), or save it for a time when your check(s) may not even cover the critical stuff.
posted by payoto at 9:01 AM on February 4, 2014
Have a concrete goal for why you are budgeting first. Want to pay of debts, want to build up 401K, we need a safety net of $X.XX whatever, have something solid not just I want to be better with money. This will help immeasurably with motivation to stick to the budget and it needs to be agreed on by both of you, one person budgeting in a family doesn't work.
Sit down and write a list of your expenses, every single thing. Mint is a great way to do this if you have time keep track of everything in there for a month or three and seeing the actual numbers is scary and motivating.
Work out what you can cut back on and for the love of god remember that wants and needs are two different things, you kid needs clothes, he does not need lots of super duper expensive brand name clothes he wants those etc. You don't "need" cable, you might not need 2 cars (even if they are paid for there are other expenses) or you can sell them both and get one more efficient cheaper to insure car. Think outside the box.
I am a big fan of Mr Money Mustache, his style is not for everybody but you sound exactly like most of his demographic. People that have had good solid incomes going wait a sec where did all our money go. So I'd suggest browsing his archives. Dave Ramsey is also a really good starting point, he has some very good books and it is easy to get asccess to his information, a lot of churches offer classes but don't let that put you off, if you are not a church going sort of person, Dave Ramsey beliefs don't really factor into how effective the program is and his books offer great step by step guides for people new to budgeting & money planning.
posted by wwax at 9:02 AM on February 4, 2014 [1 favorite]
Sit down and write a list of your expenses, every single thing. Mint is a great way to do this if you have time keep track of everything in there for a month or three and seeing the actual numbers is scary and motivating.
Work out what you can cut back on and for the love of god remember that wants and needs are two different things, you kid needs clothes, he does not need lots of super duper expensive brand name clothes he wants those etc. You don't "need" cable, you might not need 2 cars (even if they are paid for there are other expenses) or you can sell them both and get one more efficient cheaper to insure car. Think outside the box.
I am a big fan of Mr Money Mustache, his style is not for everybody but you sound exactly like most of his demographic. People that have had good solid incomes going wait a sec where did all our money go. So I'd suggest browsing his archives. Dave Ramsey is also a really good starting point, he has some very good books and it is easy to get asccess to his information, a lot of churches offer classes but don't let that put you off, if you are not a church going sort of person, Dave Ramsey beliefs don't really factor into how effective the program is and his books offer great step by step guides for people new to budgeting & money planning.
posted by wwax at 9:02 AM on February 4, 2014 [1 favorite]
Just coming in to second YNAB. It is proper budgeting software, allowing you to set up a system to budget for the future, not just check on how you spent it in the past.
They have a 4 point system for managing your money.
They have a blog and a discussion forums and there are definitely people who are working with irregular incomes discussion how they manage on there. The support articles are great (here's one on variable income)
posted by girlpublisher at 9:18 AM on February 4, 2014 [1 favorite]
They have a 4 point system for managing your money.
They have a blog and a discussion forums and there are definitely people who are working with irregular incomes discussion how they manage on there. The support articles are great (here's one on variable income)
posted by girlpublisher at 9:18 AM on February 4, 2014 [1 favorite]
It sounds like you're feeling really beat down and ashamed that you're not handling your finances in the way you wish you could. But, you've had your income drastically cut/destabilized while holding yourself to the standard of someone with a higher/stable income; of course you feel like you're failing. From the outside, let me tell you: You're not failing, but you obviously need to change SOMETHING in order to keep moving forward and feel better about your financial situation.
First, it sounds like you are trying to craft 100% of the plan with (less than?) 50% of the information. Fortunately, it's easy enough to get all the information you need.
Sit down with you wife and tell her you are seriously stressed about money, and that you need her help with untangling things. It will involve looking at the ACTUAL NUMBERS for next month.
a) her actual guaranteed income [not "if this project comes in" income]
b) your actual guaranteed income [not "if my contract magically is extended," or "if I get a temp job" income]
c) any guaranteed expenses that you will need to cover [including credit card payments]
d) any other money you have in checking that will be available for your use next month
Boom. Information. First problem solved.
Next, you need a plan. YNAB is basically designed for people in your situation. It's easy to use and it makes you feel empowered by your money, instead of ashamed. You don't *need* the software, but like most people, I found it paid for itself in about a month because of my increased awareness of how to spend my money. Please check it out.
Last, you seem very ashamed of your 50K withdrawal. Sure, High-Earning-You would be making a mistake to have done that. However, Income-Destabliized-You needed to cover expenses, and you found a way. Although some people might argue you should have reduced expenses before withdrawing, whatever, it's done - as you said, you consider private school necessary. You decided to prioritize your resources according to your priorities. That's all.
posted by samthemander at 1:49 PM on February 4, 2014
First, it sounds like you are trying to craft 100% of the plan with (less than?) 50% of the information. Fortunately, it's easy enough to get all the information you need.
Sit down with you wife and tell her you are seriously stressed about money, and that you need her help with untangling things. It will involve looking at the ACTUAL NUMBERS for next month.
a) her actual guaranteed income [not "if this project comes in" income]
b) your actual guaranteed income [not "if my contract magically is extended," or "if I get a temp job" income]
c) any guaranteed expenses that you will need to cover [including credit card payments]
d) any other money you have in checking that will be available for your use next month
Boom. Information. First problem solved.
Next, you need a plan. YNAB is basically designed for people in your situation. It's easy to use and it makes you feel empowered by your money, instead of ashamed. You don't *need* the software, but like most people, I found it paid for itself in about a month because of my increased awareness of how to spend my money. Please check it out.
Last, you seem very ashamed of your 50K withdrawal. Sure, High-Earning-You would be making a mistake to have done that. However, Income-Destabliized-You needed to cover expenses, and you found a way. Although some people might argue you should have reduced expenses before withdrawing, whatever, it's done - as you said, you consider private school necessary. You decided to prioritize your resources according to your priorities. That's all.
posted by samthemander at 1:49 PM on February 4, 2014
budgeting's super and all that, but when you have a sporadic income as a freelancer, it's tough. clients don't pay on time, or they pay at a cut rate, or sometimes you just have a slow month or two. that's when you SHOULD be living off savings, but most people i know who freelance (myself included) don't have any savings.
priority 1: your wife NEEDS a website and a linked in profile, preferably with recommendations and such. people harsh on it, but it's useful for lots of people like us.
priority 2: if she's not working/in a slow period she needs to be sprucing up the site/linked in, looking for clients, catching up on industry advances, learning the latest tweaks to the industry software, etc.
priority 3: let any shame or anger over previous decisions go. lots of people are in the same boat and only assholes stigmatize unemployment anymore. you cashed out your IRA because you needed to eat and send your kid to school. it's not like you went to cancun with the money.
priority 4: what sprucing up of your skills can you do?
posted by misanthropicsarah at 3:58 PM on February 4, 2014
priority 1: your wife NEEDS a website and a linked in profile, preferably with recommendations and such. people harsh on it, but it's useful for lots of people like us.
priority 2: if she's not working/in a slow period she needs to be sprucing up the site/linked in, looking for clients, catching up on industry advances, learning the latest tweaks to the industry software, etc.
priority 3: let any shame or anger over previous decisions go. lots of people are in the same boat and only assholes stigmatize unemployment anymore. you cashed out your IRA because you needed to eat and send your kid to school. it's not like you went to cancun with the money.
priority 4: what sprucing up of your skills can you do?
posted by misanthropicsarah at 3:58 PM on February 4, 2014
This thread is closed to new comments.
Sign up for Mint and load all your accounts in there. It should pull up some history for you.
Go through (it's a pita, but just do it) every transaction and try to back out what it was for. Use the categories to class every kind of thing you spend money on (tuition, groceries, utilities, restaurants, bars, starbucks, clothing, business expenses, etc, etc, etc--EVERYTHING). This will help you figure out where, exactly, your money goes every month. As a bonus, you can use tags to label different things, so you can make sure at the end of the year that you know exactly what your wife spent on her freelancing career or your family spent on medical needs so you can get all of that properly noted on your taxes for deduction purposes.
Once you have it loaded with some actual real-life data, go look at the budgets tab. Look at what you actually spend in each category vs. the money you bring in. See where you can cut back. Set hard limits for yourself so you don't spend more than you have. See what the bare minimum monthly draw looks like.
When you've worked out the amount you need per month to get by, go set yourself a goal (there is a tab where you can set goals and it monitors them to make sure you're contributing regularly) to establish some emergency savings for yourself.
It really, really helps to have it all out in front of you, and personally, I find the way Mint sets it up to be much more engaging and user-friendly than if I were to do it myself in excel or the like.
The most important thing, though, is just to do it. Sit down with it tonight and get yourself sorted.
Another aside, this is a pretty solid high yield savings account to use if you're going to be regularly building a small amount of savings up from scratch.
posted by phunniemee at 8:22 AM on February 4, 2014 [1 favorite]