She Strengthens

The Surprising Benefits of Budgeting with Last Month’s Income

When it comes to my finances, I’m a planner at heart. I love knowing exactly how much money I’ll have coming in each month, and allocating every dollar to its designated task. But let’s face it – life can be unpredictable, and irregular income can throw even the best-laid budgets off track.

The Power of Zero-Based Budgeting

That’s why I’ve turned to zero-based budgeting using last month’s income. This approach allows me to account for every dollar, even when my income is inconsistent. By using last month’s earnings to inform my budget for the upcoming month, I can make more informed decisions about how to allocate my funds.

Types of Irregular Income

There are several types of irregular income that can impact my budget. For example, I might receive unexpected side cash from odd jobs or freelance work. I might also receive a bonus or inheritance, or experience a three-paycheck month due to my bi-weekly pay schedule.

Making the Most of Irregular Income

When I receive irregular income, I don’t immediately spend it. Instead, I add it to my budget for the upcoming month, allowing me to make more thoughtful decisions about how to use it. This approach helps me avoid making impulsive purchases, and ensures that I’m making the most of my hard-earned cash.

The Importance of Sinking Funds

Sinking funds are a crucial part of my budgeting strategy. These are separate accounts that I use to save for specific expenses, such as car insurance premiums, travel, or emergency funds. By allocating my irregular income to these funds, I can ensure that I’m prepared for unexpected expenses and long-term goals.

My Budget Breakdown

So, how does this approach play out in practice? Here’s a glimpse into my budget:

• Down payment fund: I’m saving for a future home purchase
• Emergency fund: I’m building a safety net for unexpected expenses
• Travel fund: I’m saving for a trip to Paris later this year
• Lifestyle cushion: I’m setting aside extra cash for transportation, groceries, and dining out
• Income taxes: I’m saving for taxes on my freelance income
• Gift budget: I’m setting aside cash for birthdays and other gifts
• Medium-term sinking fund: I’m saving for random expenses, like a new Roomba or rug

The Benefits of Planning Ahead

By budgeting with last month’s income, I can plan ahead and make more informed decisions about my finances. This approach reduces stress and anxiety, and allows me to focus on my long-term goals. With a clear plan in place, I can allocate my funds with confidence, knowing that I’m making the most of my hard-earned cash.