Ultimate Budget Series: Part 1 – Income

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Ultimate Budget Series Part 1 IncomeAhh, income. The one thing that no one has enough of, but everyone has. If you don’t have any income, hang up the internet right now, hop on your bike and go find a JOB! But for those of us who have some sort of income, we’ve got to do something with it. And that’s why you’re here. As the slogan goes, “Just because you make money, doesn’t mean you know what to do with it!”

Today I want to cover how to identify your income, track your income, and different ways that the “income” category fit into your budget. The focus will NOT be on how to make more money (I’ve already got a post on that), but on how to make do with the income you DO have. Too many people believe the answer to their financial problems is MORE MONEY! I call CRAP on that philosophy, and firmly believe that knowing what to do with the money you have is MUCH more beneficial in the short AND long term. So let’s get to it!

Category Description

Income is ANY money that you own during the month. This includes (but is not limited to) disability, insurance payments, investment dividends, job wages, allowance, inheritance, and any other monies that become your possession in a given month.

How Much You Should Budget?

There are a few ways to approach this. Each method will vary depending on your payment schedule, the type of work you do, and if it is a regular or a one-time payment. Let’s take a look at a few examples:

  1. The Month Ahead Budget. Michelle and I have been one month ahead on our income since just after we got married. It’s a simple concept, but one that I credit as the most stress-reducing thing you could EVER do with your money. The income category in your budget would be one amount, paid on the 1st of the month. Think of it as living on a fixed income. You set your monthly income needed, transfer that amount over to your main checking account each month, and any extra goes to savings. Absolute best way to budget.
  2. The Bi-Weekly Budget. Many people are on this budget for the sole reason that their employer pays out bi-weekly. Not sure who came up with this, but it seems to have stuck, and 90% of the jobs I’ve had use this pay structure. It does make it difficult to budget, as you get paid on different days each month, and you need to adjust accordingly. Your bills are usually due the SAME day each month, so you are always aiming at a moving target. For this type of budget, I usually set up two columns, one for paycheck #1 and the bills that fall under those dates, and one for paycheck #2 and the bills that fall under the second half. It gets difficult when you don’t have much margin, so again, I recommend doing everything in your power to save money and be one month ahead on your budget.
  3. Irregular Income. This is common for those who are self-employed or working commission-based jobs. You may get paid a TON on the first week of the month, or get no cash money until week 4. The key to budgeting this type of income is ALWAYS having a buffer. Again (yep, here it comes) getting a month ahead will alleviate a LOT of headache if you’re in this situation, and, depending on the job, I recommend being two months ahead! For these situations, I recommend only budgeting on the bare minimum amount of income you expect to receive during the month. Anything on top of that is extra savings in your buffer, and will probably be used up the following month.
  4. Other Income. When you have investment dividends, bonuses, insurance payouts, side job income, and any other source on income during the month, I try to NOT count that money as part of your regular monthly budget. You can add it in to track in and use it, but even if it’s a regular payment, don’t use it to set up your budget (I know some people HAVE to live off their “other” payments, but in that case, refer to the “Month Ahead” budget above). These payments should be used to Turbo-charge your goals, such as debt repayment, retirement savings, replacement vehicle, vacation, etc. That’s it. If you can live without this extra money, then act like it isn’t there when putting together your monthly budget 🙂

Common Ways People Blow This Category

Laziness. There, I said it. Most reading this blog do not fall into this category, but laziness can definitely kill your income, and leave you wondering why you “can’t ever get ahead”. Now, I’m not saying I’m the ideal example, but one thing I can tell you that I am not, is lazy. I work 2.5 jobs to provide for my family, along with yard, house and car maintenance, to ensure that we can keep and enjoy what we have been blessed with.

On the opposite end, there are those that won’t lift a finger to work more than 12 hours a week because they’ve been able to survive in their parent’s basement for the past 33 years, so why try? Or there are those who make “enough”, hang their hat at their mediocre job, and do just enough to get by. Work is work, we all get that. But to not try because you don’t care, that is what makes a bad employee, and is also what gets you passed up for promotion and management opportunities.

Best Ways To Increase Income

If you want your income to rock harder than AC/DC on top of Mt. Rushmore in a thunderstorm, then get yourself motivated, excel in your position, ask for more responsibility, and then ask for more money! It really is that simple (notice I said “simple”, not “easy”). I have seen several friends and family move their way up through good ole’ fashioned gumption and Git-R-Done-ness (totally a real word. Look it up). The one thing they all had in common was a drive to excel, and under that were some AWESOME goals like starting a family, getting a house, etc. Find out what motivates you, set some BIG, FAT goals, and then work like you actually want to hit those goals someday. If you’ve done everything you can and still don’t have enough income, you can find other ways to strike it rich! Or check out how we survived on very little income.

Whatever Else I Feel Like Writing

I’m going to go a little bit Mr. Money Mustache on everyone here. The American Dream is alive and well, but so is the “exploding volcano of wastefulness” that is the middle class life. You would think everyone in America would be hiring out a financial plumber the way their wallets are leaking, but the problem is that all most don’t notice the leak, so you never fix it. You have gotten used to the way things are, life is comfortable, and cutting your cable, selling your new car, and living frugally would be too intrusive to your cocoon of a lifestyle.

Why am I saying this? Because you don’t need as much money as you think! If you ask most people how much money they need, it’s always a little bit or a lotta bit more than they have now. But the truth is, what you have now is what you have, and I bet you can manage it better than you currently are. You can constantly optimize your spending, making better decisions each week, and stop blowing money on stuff you don’t really care about. So when looking at your income at the top of your budget each month, don’t sob uncontrollably like someone just broke your Justin Bieber CD. Instead, look at it with confidence, plan to use it wisely, and challenge yourself each month to kick even more booty than last month. You are effectively giving yourself a raise by getting on a budget, so don’t worry too much about increasing income, and start focusing on being a great money manager with you already have.

Comments: Are you satisfied with your income? If not, what are you doing to increase it? Also, how do you budget your income before the month begins? Are you a month ahead, or still living paycheck to paycheck? This is the first of a very LONG series, so I would LOVE to hear some feedback on what you think, and how I can help more with this series. Thanks for reading!

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

24 thoughts on “Ultimate Budget Series: Part 1 – Income”

  1. I’m pretty satisfied with my income. I am working on replacing my active income with more passive streams, but that takes some time but I am trending in the right direction!

    • That seems like a great place to be. That is my goal as well as I inch toward someday being financially independent. So far, I’ve got a WAYS to go!

    • Drive and motivation are a great thing, and when the money follows, it’s only natural. I just hope that people don’t see more money as a fix to a budget problem. Fix the budget, then worry about bringing in more.

  2. I like the statement, “everyone should be hiring a financial plumber…” that’s hilarious and so true. When it comes to leaky wallets and budgets that just don’t stick, it’s usually a luxury people have grown used to – like cable. We’re currently paying way too much for our cable (this is only our 2nd year purchasing cable) and it’s really something we should cut. It’s a total waste – we really don’t watch that much TV. I think this will be getting cut out of our budget soon.

  3. I’m always trying to figure out how to decrease our expenses. I think the item I keep avoiding is car insurance 🙁 I need to look at it. We pay $200 a month for two used cars (2007 and 2008). It doesn’t make sense.
    My goal is to figure out how to increase our income by $20,000 a year.

  4. I have variable income and I based my monthly budget off last year’s income…which sucked btw. About the second half of last year I started looking at other ways to make money like task rabbit, being a personal assistant, and even retail for a short stint. This year I’ve added blog advertising. I know that the summer months are typically slower so I did my best to save up as much as I can in an emergency fund so I’m not as stressed out…but I still do not make as much as I want..and that’ not an outrageous amount, but it HAS to be better than last year.

  5. “Just because you make money, doesn’t mean you know what to do with it!” Exactly right, in my opinion its not only how much you make, but how much you can save. Recently had to downsize our House in San Antonio, and that greatly reduced our monthly costs.

    • That’s a BIG move, Bill! Nice work. I’d love to hear the story of how you made the decisions and how much you are saving. In our culture, downsizing is something “poor” people do, but in reality, it’s actually something RICH people do!

  6. Jake, I spent years in amazement as to how we could make a six figure income, yet have no money at the end of the month. “I have to make more” was always in the back of my head. Now, I feel like we barely spend anything, even though costs for our basic necessities like electricity and gas continue to rise. I would challenge anyone who feels broke to take a hard look at where your money is going. Odds are most of it is getting spent on crap or new things you just don’t need, like a new car every three years. Thanks for helping open my eyes to this concept. Not sure why it took so long, but even smart people can be really dumb sometimes.

    • You are a great case study in American thinking changed to a frugal mindset, Kim. Making more does not solve your problems, actually looking at your cash money does 🙂

      Like Dave Ramsey says, “More money just means more opportunity for bigger mistakes with more 0’s at the end!”

  7. I’m happy with my income given my years of experience but I know there is room for increase. I’m always training and learning and no we don’t live pay to pay. I’m updating my series as well with the suggestions of my fans.It’s always good to get input from those that use it. I look forward to your series as well.

    • You’ve got this budget thing down, Mr. CBB, that’s for sure! I agree, looking to improve and increase your skills and income are great goals. But I always recommend figuring out where your money is going before worrying about making more, because all that would allow is wasting more money than you currently do 🙂

    • My sentiments exactly. Killing debt does light a fire to find more ways to make more money, I’m in the same place with my student loans. Once they’re gone, it’s gunna be weird paying myself instead of some other company…

  8. I get paid bi-weekly and here´s my system for getting organized.
    There are two months a year were you get paid 3 times, on the first, the 15 and the 30th.
    Have two accounts, one were you deposit the check or get the money transfer from your job, and another account thats a checking account used for daily expenses.
    On that month that you get paid 3 times, use the income of the 1st of the month for the next 15 days, then the 15th of the month arrives and you get paid again, so use that for the next 15 daysuntil the 30th or 31st, then keep doing this afterward, eventualy your payday will shift from the 1st and 15th of the month to some other days, the money will go to the first account but you will have money on the second account to use on a daily basis, just transfer the amount every 1st and 15th of the month, six months will go by and by the time you get paid 3 times again you will be able to save one biweekly pay and use it for whatever you want.
    I dont know if this is so obvious for other people, but for me it wasn´t at first, now im able ho save one months pay a year without any efforts and also i can budget more efficently because I know that every 1st and 15th of the month I have money.


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