Making a budget when you’re on a commission is a bit trickier than if you have a steady salary or wage, based on the fact you’ll need to focus on your cash flow, not just your spending. If you have an idea of when your commissions will be paid and estimates of the amounts, you’ll be able to create a useful budget to help pay your bills and budget for savings. If your commission schedule and amounts are uneven, you’ll need to use your current savings as a guide when building your budget.
Collect last year’s financial documents to determine your likely monthly expenses for the coming year. Include bank and credit card statements, checkbooks, bills, receipts and your tax return.
List your expenses, dividing them into fixed, variable necessities and variable discretionary categories. Include expenses such as rent, car payment, Internet service, cable and student loans in the fixed category. Include necessary expenses that will fluctuate, such as groceries, utilities and phone, in the necessary variable expenses. Include items you can cut back or live without in the variable discretionary category, such as dining out, clothing and entertainment.
Create a budget document that lists your expenses in the months they will come due. Do not average expenses if they will be spread over months. For example, if your $300 car insurance premium is due in January and covers six months, record the expense as $300 in January, rather than as $50 each month for six months.
Enter your estimated income in the months and amounts you project. Subtract your expenses from your anticipated income each month to determine during what months you might have a shortfall and will need to use savings or cut spending. Create three scenarios for your budget, which reflect your best guess as to your commissions, and optimistic and conservative projections.
Create a row for cash-on-hand that starts with your current savings in January and adds and subtracts money each month, depending on your commissions projections. For example, if you start the year with $15,000 in savings and project a shortfall of $2,500 in January, show savings of $12,250 in your January savings field. If you will receive a commission check in February and will have $3,000 more in income than expenses that month, show savings of $15,250 in your February savings field. Use your savings row to help you keep cash on hand for months when you will not have enough income to pay your expenses.
Budget for savings, such as a home down payment or retirement, by adding the savings goals as expenses in your variable discretionary expense section. Put the amount of money you want to save in the monthly field when you have excess cash. Check your cash-on-hand number after you do this to determine if you will have enough cash for deficit months.
Items you will need
- Last year's financial records
- Jupiterimages/Polka Dot/Getty Images
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