Lesson 2 of 11 · 5 min read

Know your income

Budget with the money you actually take home, and how to plan when your pay changes from month to month.

Use your take-home pay

The amount you earn from your job is not the same as the amount that lands in your account. Taxes and other deductions, such as health insurance or retirement contributions, come out first. Your budget should use the smaller number, your net or take-home pay, because that’s the money you can actually spend.

Add up every source of take-home income for a month: paychecks, benefits, child support, side work.

Fixed costs come first

A simple way to see what you have to work with: take your monthly take-home pay and subtract the costs that are the same every month. What’s left is what you have for everything else.

Example: what’s left after fixed costs

Monthly take-home pay	$3,200
Rent	− $1,100
Car payment	− $320
Car insurance (monthly share)	− $120
Phone	− $60
Left for groceries, gas, fun and savings	$1,600

If your income goes up and down

Tips, commission, seasonal or freelance work all make income hard to predict. Two careful ways to choose a number to budget with:

The cautious way: use your lowest month from the past six months.
The average way: add up the last six or twelve months of deposits and divide by the number of months.

Example: six months of variable income

April – September deposits	$2,400, $3,100, $2,050, $2,900, $3,600, $2,650
Lowest month (cautious)	$2,050
Average month ($16,700 ÷ 6)	about $2,783

Budgeting with $2,050 means most months leave extra. Save the difference in good months to cover the slow ones.

Tip

When a slow month comes, cut flexible spending such as dining out and entertainment first, and look at your income and spending every month instead of once a year.

Remember

Budget with take-home (net) pay, not your salary before taxes.
Subtract fixed costs to see what’s left for everything else.
With uneven pay, budget with your lowest or average month, and save extra from good months.

Record your income

Add your paychecks in BET as income. Set them up as recurring entries, and BET adds each one for you on payday.

Sources and further reading

Budgeting with Irregular Income (Penn State Extension)
Budgeting With an Irregular Income (South Dakota State University Extension)
Calculating the numbers in your paycheck (Consumer Financial Protection Bureau)
Building a Budget (Penn State Extension)

General education, not financial advice. For help with your own situation, talk to a qualified, trustworthy professional such as a nonprofit credit counselor.