Starting an Emergency Fund with a variable income

[MamaBird06]

I hope this is the right place to post this, I am having a difficult time figuring out how to start an emergency fund on a variable income.

My hubby works in sales 100% commision, so we don't know how much he will make each month or even each week. January and February are generally the slowest months and right now is probably not the time to begin an EF, but I want to know where to begin.

We are a one income family so, there is no steady money that is coming from me. Last year we had 2 months with 0$ income, one because of a trip and one because my husband was in an accident, but we are not going on a big trip this year and I hope no accidents either. But of the working months, the least he netted was 2300K (february) and the most was about 11000K (june).

We are aware that this month and next may be very slow, so we will keeping our spending to the strict budget in order to not go over the 4000 minimum and will be halting the snowballing of debt until we see where the winter months are going in the way of income. Our monthly expenses are about 4000K take home pay for a bare minimum, for January, we have about 2100K of that already and still need 1900K for the rest of the month and so far he has made about 200$ take home for this coming friday. So once we hit the amount we need for the month, should we try to save for the emergency fund or save for the month of february? I am having a hard time wrapping my brain around this, and any help appreciated.

We are trying to payoff a lot of debt right now also, but I would really like to start a 2K emergency fund on the safe side.

[Joan.of.the.Arch]

So sorry for your DH's accident.

It seems to me that you have got to save for February before you even work on the emergency fund. Because if you do not have money for February that will be your emergency. With unpredictable income from just one source, I'm afraid I think you need to prioritize some emergency saving over snowballing the debt, too. But I understand that if the debt carries egregious interest or if not paying it endangers your family (say, you would get gas service cut off in winter) then you do need to at least keep current on it.

Have you already cut spending to the bone? Even three or four months of that might help you save enough to save for 2-3 months worth of of emergency funds.

[jIM_Ohio]

Your EF is based on expenses.

I suggest keeping 24 months expenses in cash for you because income is variable and you have lots of risks if income is lost (such as no short term/long term disability).

Start small
goal #1 is to know your expenses- use Jan and Feb to track what the minimum amount is you need to live on.

goal #2 would be to set aside about 1 months expenses in March and April.

goal #3 would then be to steadily grow the EF to 24 months expenses (will probably take 3-4 years).

If you post a budget of fixed and variable expenses, myself and many others here will give you an idea of what the EF needs to cover and how to make it grow.

[snafu]

I suggest you list your monthly expenses and debt including interest rates as the very experienced folks here can offer some suggestions to help you 'wrap your brain around' managing on variable income.

[disneysteve]

I suggest you list your monthly expenses and debt including interest rates as the very experienced folks here can offer some suggestions to help you 'wrap your brain around' managing on variable income.

I agree. Let's see the numbers. Show us what you are calling your "$4,000 minimum" spending. I suspect that number is higher than it could be. If there are months where he only brings in $2,300, having a budget based on a minimum of $4,000 is a problem waiting to happen.

[MamaBird06]

So sorry for your DH's accident.

It seems to me that you have got to save for February before you even work on the emergency fund. Because if you do not have money for February that will be your emergency. With unpredictable income from just one source, I'm afraid I think you need to prioritize some emergency saving over snowballing the debt, too. But I understand that if the debt carries egregious interest or if not paying it endangers your family (say, you would get gas service cut off in winter) then you do need to at least keep current on it.

Have you already cut spending to the bone? Even three or four months of that might help you save enough to save for 2-3 months worth of of emergency funds.

yeah i think you are right, ideally we wanted to have 4000k saved for the jan/feb months, my logic was having half of 2 months of my husbands lowest net brought home last year, and that would be our buffer, but we didn't get the money saved in the fall like we wanted. But you are right, the best thing to do is to stick with the minimum budget and save any money for february and once that is over build up the Emergency fund in the spring.

Here is a break down of our monthly expenses. As you can see we are pretty much paying our bills with most of the projected 4000$. One thing to note is that mine and my husbands medical and dental insurance come out of his check which is 400$ monthly and my husband also has a 401k plan through work, so the 4000$ is what is the net take home pay.

Monthly Budget:
=4000.00
Estimated spending:
=3997.89
*denotes automatic withdrawal from checking

1) January bills:

Mortgage: 1582.97
Netflix: 22.46 *~ hubby won’t give this up
BCBS(son‘s health insurance): 42.05 *
Commerce CC: 15.00
Tmobile: 91.57
Honda: 414.78
Water: 57.55
Discover CC: 159.00*
At &t: 39.90
NFM CC: 70.00
State Loan: 42.43
Atmos gas: 146.30 (variable)
Fed Loan: 68.41
Citi: 105.40
Electric: 109.39 (variable)
BOA CC: 100.00 *
Fitness center: 41.53 *~ We want to keep this also, dh get’s a good deal through work and this is for both of us and daycare for our son for the month
Car/life insurance: 196.00
Fed taxes: 200.00*

= 3504.74

2) Medical:

Would like to pay this bill if possible this month: Dentist: 43.15

=43.15

3) Other expenses:

Husbands gas/cigarettes and eat out allowance: 160.00, dh works 5 mins from home

My gas: $40 I don’t drive much out of our town

Groceries/household products: 100$ I do a lot of couponing and plan to live off what we have in our pantry this month and next, aside from produce and perishables (typically we spend about 275$ a month on groceries/household/eating out)

Misc/haircut/clothes/etc: 150$- husband will need a haircut, but other than that, this is more of a buffer

=450.00


The above amounts on the cc’s are the minimum payments we need to make each month.

the only bills that vary dramatically is electric and gas, other than that, everything is either fixed or varies only slightly month to month (ie: water) The at &t bill is for 2 months, for some reason they forgot to bill us the first month so they just now tacked that on, we were not late as our previous bill says our previous balance due was 0.00, so that bill is normally 19.95, for internet only. Like i said in the earlier posts the only areas that we don't want to give up our the gym/netflix, dh is trying hard to quit smoking, but he doesn't think he can do it on his own and that is about 80$ a month. I am also giving him 40$ a month for (eating out) as I know he probably will at lunch a couple times so i am budgeting it in.

We haven't started paying on the medical debt from my husbands surgery, the bills are still pending insurance approval right now.

[disneysteve]

What is your total debt right now?

You, and especially your husband it seems, need to accept the fact that the luxuries have to go until the debts are repaid. You don't NEED Netflix. Sure, it is nice to have but right now you can not afford it. Yes, it is only $23/month and giving it up won't solve your financial problems, but you have to change your mindset. You have to look at every expenditure and ask yourselves if that expense is helping or hurting your efforts to get debt-free. Netflix is clearly hurting.

You say the fitness center fee includes daycare for your son for the month but you said you were a one-income family. If you don't work, why are you paying for daycare? If it is just for someone to watch him while you work out, drop the gym membership and exercise at home for free where you can watch him yourself. That will save another $43/month.

If it has been more than a year since you got auto and life insurance quotes, it is time to do it again and see if you can trim those bills any.

How much do you owe on the Honda? What is is currently worth? How many months remain on that loan?

Obviously, smoking is a big problem both to health and budget, but you already knew that.

Some will attack the eating out money, but $40/month is actually pretty minimal in my opinion so I'd leave that alone.

The $150 for hair/clothes/misc. needs work. I cut my own hair at home with a clipper I bought almost 5 years ago for $15. My wife cuts her own hair for free with a scissors. You and your husband probably have all the clothes you need. You may need to pick stuff up for your son as he outgrows stuff. Make sure you sell the old stuff on ebay or a consignment shop and that you buy "new" stuff at thrift shops and ebay or craigslist whenever possible.

[cantretire]

Can hubby walk to work in good weather? Carpool? Could save money on gas AND wear an tear on the vehicle.

[Joan.of.the.Arch]

I have heard that the cost of drugs such as the Nicorette products to help one quit smoking can be about the same that one spends on cigarettes. You and DH might check into that and see if now is the time to spend on stopping smoking. I know it is really hard and most people have to many a good many attempts to kick it before they meet permanent success. He sure would not be the first one to quit smoking because of the cost as much as other reasons.

If you are driving a separate car than your DH, I suggest that you consider taking it out of commission for a few months. Park it and pret4end you are a one-car family. Call the insurance company and tell them it will be garaged, so they can cut the insurance on it, or at least give you a major discount for a garaged vehicle. Use the insurance savings plus the gas savings to fatten your emergency fund (or even to pay down debt). I know it might not seem like much, but every little bit helps.

I really agree that the $150 a month for clothes and hair should be cut down. (Sorry to all the barbers and clothing retailers out there.) You can do it!

Any chance that you yourself can pick up a little income? Even if it were just a couple hours per week, you'd be able to take care of the AT&T bill.

I might as well ask, as it is ever an issue when budgets are tight: Can you lower that T-Mobile bill? Can you get rid of it all together?

[disneysteve]

I have heard that the cost of drugs such as the Nicorette products to help one quit smoking can be about the same that one spends on cigarettes.

This is a point I constantly make to my patients. I recently had a patient come back after I had prescribed Chantix for her. She said she didn't get it because it was "too expensive." I asked how much it was and she said $150. I then asked how much she smokes. She said 2 packs a day. I asked how much that cost her and she said $7/pack. I then pointed out that she thinks $150/month is "too expensive" to quit smoking but she has no problem spending $420/month to keep smoking. Doesn't make any sense when you actually run the numbers. It is always cheaper to quit.

[Credit Girl]

I would start by saving a hundred or a couple hundred dollars a month for an emergency fund. I managed to save $100 a month for emergencies and although it may not sound like a lot short-term, in a couple years that money will be very useful if anything ever came up. You can even save $50 a month or $20...Just practicing the saving will help you.

[MamaBird06]

We just recently picked up the gym membership, it was hubby's idea and while I'm the one who uses it more, we could get rid of it, and i told hubby that last night as he is not using it much and i told him that if he doesn't use it more, we can just stop it if need be. The daycare is for only during our workouts, and is honestly something I wanted for both us and my son as he doesn't get much social interaction at home with me all day. We don't have anyone nearby, no grandparents or family to babysitt him and we go out alone maybe once every 6 months, so this is about it for our 'dates', going to the gym a couple times week together...

As i said, he will not give up netflix, so it is one thing that will be staying.

yeah the 150$ is more of a buffer, my hubby's haircut costs about 20$, but really we don't need any clothes at least for the next month or two, so that number could potentially only be 20$.

Walking to work probably wouldn't fly for him either, it is under 20 degrees here and there is a foot of snow on the ground, so that won't happen

Chantix: that is what he wants to go with, he said he was going to trying quiting cold turkey and that lasted a couple hours, this is probably the 10th time he's officially tried to quit in 5 years. We are aware of the costs so that is something he may be doing in the next month, he is just a big procrastinator on making drs. appt for non-urgent things like this.

taking one car out of commision may not be a bad idea, as we have been having horrible weather here so we have really been just using my vehicle (the better in snow) mostly. I will talk to him about that tomorrow.

Tmobile really needs to stay, dh has to have a phone for work and we don't have a home phone line, so that's why i have one. He will be able to deduct some of the costs for the phone on taxes..

Me bringing in extra income: i do sell things occassionally on ebay, made about 75$ last month (50$ of which I am transferring today from paypal to checking), and also do rebates on products i buy, I know i have a 15$ one that should get here this month and 2 rebates totally about 30$ i need to send off that i will probably get in february. There are a few more items i could try listing on ebay or craiglist to make some more money. I have tried getting a part-time job, but with childcare costs it is not really worth it as my husband works long hours and we don't have any family nearby to babysit at a cheaper rate.

[LivingAlmostLarge]

Don't put off the quit smoking. Until he decides to "postpone" to death. Not to scare you, but i'd be worried he'd have a lun lesion or something and be unable to work and it sounds like you'd be in trouble. He should realize that.

[bjl584]

Like others I see alot in your budget that needs to go. It says that you have daycare through your gym membership. If this is the case, is it possible for you to work? Even if it's part time you should be able to bring home at least an extra $100 a week.

[bjl584]

The more I look at this, the more that I am thinking that you should not focus on building an Emergency Fund. You first need to create a budget and get your spending under control. An EF can come later. You first need to get a handle on your finances and start approaching money, saving, and spending differently. Try reading some books by either Dave Ramsey or Suze Orman to get some insight on finances.