4 Tips for Budgeting with a Variable Income
When it comes to working in the home health world, it’s no secret that pay can be unpredictable.
This can be due to a few different factors but largely because most positions are hourly, meaning we only get paid if we see our client. Now, it’s also no secret that cancellations and no shows happen at a higher frequency in the home health world meaning there’s a higher risk of not getting paid.
I’ve recently been sharing more about my income as an early intervention OT - including how much it fluctuates and changes from check to check. That being said, I like to say that my income is “unpredictably predictable” meaning although it varies, for the most part I have a good idea of the range I’ll be bringing in each month.
As many of you know, I’m also on a debt free journey (this student loan debt baggage is not it) and I’m a huge advocate of budgeting. But how in the world can you budget when your income varies? I’m glad you asked! Here are 4 tips for budgeting with variable income:
Figure out the absolute minimum amount you’ll be bringing in each month:
For my company, we are required to bill at least 27 hours per week to maintain our full time employee benefits. This means, I can expect to get at least 27 hours each week. Our company does have systems in place for if we start struggling to meet this minimum but this has never happened to me before. So although I usually get 30-40+ hours a week without any difficulty, I still budget everything around 27 hours per week to be safe.
Track your living expenses every month
It’s important to have an understanding of how much you spend a month on basic living expenses - I’m talking about things you need to survive (housing, car, groceries, etc.) not those random Target trips! This will give you a good idea of how many hours you need to make sure you’re clocking, no matter what. This is where you take into account your cancellation rate. For me, I can expect no more than 5-10 cancels per week, and it’s usually closer to 5. That means, even if I lose 5-10 hours per week I’ll still make enough money to pay for my very basic living expenses.
Have a plan for what to do if you make more than expected
Now the goal is to actually make more than those minimum numbers so that you can bring in a little extra each month to support whatever your financial goals are. For me, I have a system where I know if I bring over a certain amount (and in most cases I do) I will put it towards savings, extra student loan payments, investing, or treating myself - in no particular order! I can’t tell you what to do with your extra money, but I can tell you that you still need a plan for it. I’m a huge believer that you need to know where your money is going at all times so be sure to update your budget once you realize you’re going to be bringing in extra funds.
Track your income to find a pattern
Once you’ve been working for a while, you’ll definitely start to notice a pattern including how many cancellations or no shows you might get per week, and how much you’re generally bringing in each month. Most companies will have some sort of system where you’ll be able to see your pay stubs but if not, make sure you keep track of what you’re bringing in each month to find a pattern. I would say it took me about 3-6 months with a consistent caseload to finally have a good idea of my “unpredictably predictable” income.
This is also why I highly encourage negotiating for a higher hourly rate to soften the blow when you do get those cancellations and no shows because unfortunately they are inevitable in the home health world. However, if you can get them rescheduled within the same pay period, your pay won’t even be impacted - which is what I generally try to do. I understand it can be nerve wracking to think your pay is going to be all over the place - but remember it all goes back to budgeting! Figure out a good system for yourself and it shouldn’t be as stressful.
Any other tips to add? How do you budget with variable income?