Money Management

Do You Count Your Chickens?

chicken Before you read this post go check out this comment to one of my previous posts. In it, Don talks about how they planned out their house purchase based on his current salary with no raises factred in. This got me to thinking about how many people rely on extra income when they plan big purchases or their budgets. If you plan with the extras included you’re setting yourself up for failure. What if none of that comes through?

I’m sure a lot of people, before the economic downturn, purchased their home thinking they were going to get overtime forever or were guaranteed a raise. Then the downturned happened and businesses stopped overtime and cut out raises. What are these people to do now?

I never budget with any extras in mind like overtime or extra paychecks. I base my budget on the bare minimum that I would receive each month. Any extra is just a plus that can go into savings.

I’ll give you an example of why I don’t include extras. A couple of months ago, before Beth (my girlfriend) got a new job, it was supposed to be her month to get an extra paycheck because she gets paid every 2 weeks. What ended up happening is her hours were cut. This caused that extra paycheck to be about 1/3 of what it was supposed to be if we had planned for it.

If it was in our budget we would have been in deep trouble because we would have counted our chickens before they hatch.

So here’s a little checklist of what not to do:

  • Don’t include any extra income in your budget (ex. overtime, bonuses, extra checks)
  • Don’t plan any big event around bonuses
  • Don’t plan a big purchase around income that might not always be there.
  • Don’t count your chickens before they hatch

I’ll just leave you with a quote said by Clark Griswold in Christmas Vacation after his bonus didn’t come through:

Hey! If any of you are looking for any last-minute gift ideas for me, I have one. I’d like Frank Shirley, my boss, right here tonight. I want him brought from his happy holiday slumber over there on Melody Lane with all the other rich people and I want him brought right here, with a big ribbon on his head, and I want to look him straight in the eye and I want to tell him what a cheap, lying, no-good, rotten, four-flushing, low-life, snake-licking, dirt-eating, inbred, overstuffed, ignorant, blood-sucking, dog-kissing, brainless, dickless, hopeless, heartless, fat-ass, bug-eyed, stiff-legged, spotty-lipped, worm-headed sack of monkey shit he is! Hallelujah! Holy shit! Where’s the Tylenol?

Have you ever had a time when you planned something with extra money that never came through?

 

Comments (13)

  • Do You Count Your Chickens? — Financially Poor…

    I’m sure a lot of people, before the economic downturn, purchased their home thinking they were going to get overtime forever or were guaranteed a raise. Then the downturned happened and businesses stopped overtime and cut out raises. What are these pe…

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  • Great post, Kevin! (And thanks for the Christmas Vacation monologue, too.)

    I just got off the phone with a guy who bought a truck assuming that he has a side job coming through that would generate enough income to make the payments. He counted the chicken; the job fell through in the 11th hour and he was left holding the bag.

    The counting of chickens before they hatch strikes everyone, but I think it strikes high-income earners more than most. I’ve met with a lot of folks in the past year who make solid six figure incomes that are based substantially on commissions and bonuses. During boom time, they created a lifestyle that relied on that income. In the bust, their lifestyle is now the bane of their existence.

    Great idea on planning for a conservative income, allowing the oppotunity for additional income to be diverted to savings. But building a game plan on shifting sand (like volatile income) is like building a house of cards.

    Reply
    • Yea, people who bring in commissions are the most vulnerable. Great comment.

      Reply
  • Love the Christmas Vacation reference — we have the original movie poster hanging in our basement, which always gives me a giggle.

    Like your GF, I also get paid every other week, which leads to two 3-paycheck months a year (July being one of them). I also work freelance writing gigs, but I just can’t count on that income coming in on a regular basis. When we bought our home, we didn’t factor in any ‘extra’ money when we laid out a budget.

    Reply
    • I find it actually pleasant whenever I get any extra money and know I don’t have to use it to get by on.

      Reply
  • Yep – BF worked a NYE event, and we celebrated the night after instead. The idea was he worked NYE so that we could afford to do something the next day (spent a night in a nice hotel). Unfortunately that pay never came through, so I had to end up using some $ from my travel fund instead.

    Reply
    • That’s good that you had a travel fund or it could have been a bad situation.

      Reply
  • This is a very good plan to not count extra income in the budget. That is what I am doing with any blogging income, it goes into savings, but I’m not counting on it as part of our budget. My boss (she’s 70) goes one step further, with the advice to only count 70% of your income. Say you have $1000 coming in each month, only budget $700 of it. If more people used that formula we would have less problems with debt.

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    • Thats a good tip. That would help a lot of people be not get into debt.

      Reply
  • This is so true! I have a coworker who BOUGHT A NEW CAR because she and her husband were banking on her Christmas bonus. Well, she ran into some major health problems and had to take around three months off November – January. Her boss generously decided to continue paying her salary but didn’t want to give her a bonus. Kind of like the salary was her bonus. She had to go crawling to her supervisor, begging for the money because without it they would be in deep trouble. You should never, never buy something before you have the money. (What if she had been in a debilitating car accident and had to quit work permanently?) Great post!

    Reply
    • Thanks, people need to learn to spend with the known instead of the unknown

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  • I approached my home buying in the same way. There used to be a rule of thumb that your rent should equal one week’s salary. A mortgage should be similar. This conservative approach keeps you from overspending. When my daughter bought her condo, I suggested the same thing. Although her salary has doubled since, she is quite happy she did what I suggested.

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