As many of you regulars know, Micah is a professor. At this point it would be more accurate to say he’s an adjunct. He’s writing his dissertation, so he never takes on more than 2 classes per semester.
This means that he’s not a salaried teacher, which means that while during the fall and spring he’s bringing in a regular paycheck, it suddenly disappears mid-May and we’re left with what I’m earning.
It really helps that right now we’re a Dual Income No Kids family. For some reason I mentally associate the term “DINK” with wealth, but at this age it really doesn’t mean much except that we have two partners’ income streams coming in. In my examples, I’m going to presume that you’re in a two-partner household with both partners working because that’s what I’m working with in my own life.
How do we budget when we have such a dramatic shift in income?
We started early, fortunately, because I realized in October that this was coming up in the summer. Each month, we set aside money into a short-term savings account in preparation for the dry season. I call this our “cushion fund.”
Because we were putting some of his income aside anyway, we didn’t get in the mindset of having quite as much money as we were earning. That helped too.
During this off-season, we’re going to use the cushion fund to meet any difference in income and spending. If you find you don’t need a cushion, then use it for your debt snowball or savings snowball.
It’s particularly important for us to have a cushion fund because the freelancing part of my income is flexible.
Do you need a cushion?
Some financial cushion including or in addition to your emergency fund is probably a good idea in case one partner loses her job. I think all freelancers should have one in case of a dry month. But even if your partner has seasonal/freelance work, you may not need one.
For example, if Jane makes $3000/month at her year-round job and she and John live on $2500, then John’s income of $2000/month during the school year can be put towards other important/fun things. You can put all your retirement money away during that part of the year, or do the debt snowball while you’re both working (see more on that tomorrow).
How much money should you put in the cushion?
This depends a lot on what you can afford and what you live on already. If you’re John and Jane Smith above, you don’t need a big cushion. On the other hand, if John brings in $3000 and Jane $2000 and they still live on $2500, then they should put away enough to have that extra $500/month every month that John’s not working.
It may be a lot closer, like John brings in $1500 and Jane brings in $2000 and their monthly expenses are about $3250. But even putting away that extra $250 will help. Or putting away an extra $100/month.
If you’re a single person, it may be harder to build that cushion since you don’t have the second income coming in. Still, anything you can put away will help with the off-season months.
If you don’t have or can’t afford a cushion:
Another option, of course, is getting a summer (school) job. Micah may do that in future summers (though depending on the position he gets someday, he may have a salary all year), but right now we want him to focus on his dissertation. He’ll be doing a section of summer school in July, but the rest is writing time.
One of his coworkers, on the other hand, spends her summers as an office temp. A lot of places in our area use temp agencies to cover for receptionists and the like who use their vacation in the summer. It pays better than being an adjunct, so she and her partner put the money in their cushion for fall.
And you can create a special “irregular income” budget. No Credit Needed explains how.
Do you need a cushion with your work? Is it freelance or seasonal?
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Our local credit union actuallys helps set up a savings account for this purpose – it’s been helpful to my teacher friends, because they don’t even have to think about their income come June.
We have a cushion fund. I like that term by the way; I think I’m going to steal it. We need one because my husband’s income can vary quite a bit due to overtime. Sometimes the overtime is insane and he is more than doubling his paychecks, then sometimes we go weeks, or even months with none. We need a cushion for paychecks that don’t have any overtime on them. We put the unused cushion towards debt, if we feel we don’t need it.
Great post! I’ve heard a lot of non-teachers say things like, “Teaching is great because you have summers off. (And ergo, we don’t have to pay them what they deserve.)” Well, it would be great if most teachers were paid better. Taking a summer job is an option for some, but it can be difficult, especially in rural areas to take a summer job since those types of jobs tend to pay crap and you’re often competing with all the students who are out of school.
Right now, my husband makes the vast majority of our household income through a full-time, year round job. So, that definitely helps us when it comes to budgeting.
However, he and I both make irregular income at times. The biggest challenge for us has been to not expect that income, and to not treat it all like play money.
And even with a regular job, I can’t stress how important it is to have enough in savings to cover the bills for at least a few months in case something happens to that regular income. Fortunately, we’ve been able to start such a fund while paying down our debt. While it’s tempting to apply it all to our debt, having the extra “cushion” means that we’re never a paycheck away from a complete disaster.
Wow, this hits really close to home. Lauren wants to be a teacher someday so we will eventually go through the exact same thing, budgeting differently with a teacher vs with her current career.
That’s one reason I opted not to teach after I finished my Master’s. We simply couldn’t get by on the meager pay I’d receive as an adjunct.
Good planning. I really approve of Micah getting as much time on his dissertation as possible.
You’re a smart cookie to have anticipated that and started saving before summer. My mom and one of my best friends are full-time teachers (one high school, one elementary school), and they get paid the same amount during the summer as they do the school year. I’m jealous they get summers, but I am so NOT envious of their lives during the school year. My mom spends all her evenings and most of her weekends grading never-ending stacks of essays, and my girlfriend spends so much of her free time writing lesson plans and dealing with angry parents. They put in so much extra time than most of us do, they deserve it. But it really stinks when someone is in Micah’s position and doesn’t get those benefits of being paid year-round. Anyway, good luck on the budgeting!
FWIW, I believe The Millionaire Next Door’s research said the most common occupations of the spouse of the millionaires they looked at were homemakers and… teachers. Is that why everyone I date (ever, since I was 18) has been in education? 🙂
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