Keeping your pay steady

The first two months are different

On the day you begin, the buffer is empty. If your first month is a quiet one there is nothing in there to draw from, and the whole thing stops before it has started.

So begin under your real number, not at it. On paper the safest start is the lowest of your six. In chapter four’s example that was September, $3,500: set your pay at the smallest month you have actually had and no month can empty the buffer, because no month is smaller. Every one of them puts something in.

That is the careful version, and if you are doing this by hand it is the one to use. IssaBudget starts you a little higher, at a typical month rather than your worst one, because it can watch the money in a way a notebook cannot: it checks what is actually there before it funds your pay, and says so plainly when a month cannot cover it. A rule that harsh is protection you only need when nothing is watching.

Two or three months of that is enough to stand on. In the example, starting at $3,500 puts $100, then $1,600, then $1,200 into the buffer: $2,900 after three months, and the worst month in that table only ever takes out $800. Then move up to your real number and leave it there. It costs you one quiet summer, and it is the difference between a system that lasts and one you give up on in week three.

Watch which way the buffer moves

One month tells you nothing. A few months of the buffer tell you everything.

Up and down, ending near where it started, means your number is right.

Falling three or four months in a row means your number is higher than the business can currently give you. Re-average and set a new one.

Rising and never coming back down means the opposite. The business can afford more than you are taking, and you are allowed to give yourself a raise.

If the buffer runs out

It happens, and almost always for the same reason: the business changed and the number did not. There is an order to work through, and it is worth reading now rather than in the week you need it.

Start by working out this one month on its own, exactly the way chapter four worked out the six. What came in, less what the appointments cost you to deliver, less the bills, less the income tax share and the slice for the once-a-year ones. Whatever is standing at the end of that is what the business can pay you this month. It will be under your number, and it is still the honest amount.

Now look at your own bills at home. If that smaller pay still covers them, take it and carry on. One thin month is not a crisis and it does not need rescuing.

If it does not cover them, this is exactly what your emergency fund is for. Take the difference out of it and pay your rent on time. That is not raiding it and it is not failing at anything, because going without was the outcome you built that fund to prevent. The next chapter is all about it.

Two envelopes stay shut, and they are the two with the most money in them. Your income tax envelope and the once-a-year envelopes have been filling quietly all year and none of that is yours to spend. Being short does not change whose it is, and both of those bills turn up anyway.

Then re-average, that same week. An empty buffer is the signal from the last section arriving all at once instead of over months, and it is asking for exactly the same thing. Nothing has failed. The number was set before the business moved, and now you know.

When it is not a budgeting problem

And if the honest new number is one you cannot live on, the budget has already told you everything it can.

No amount of careful management makes up for not enough coming in. No envelope has ever created a dollar; all any of this does is tell you the truth about the dollars you have. When the truth is that there are not enough of them, the question stops being how to arrange the money and becomes how to bring more in. That is a different job, and a bigger one, and it is the only thing that fixes this.

Knowing that early is worth something on its own. It is the difference between a hard year you saw coming and a hard year that arrived without warning.

You should not be the last one paid

In a lot of small businesses the owner ends up the worst-paid person in the building. Almost nobody chooses that. It happens one reasonable postponement at a time, and it keeps happening until somebody writes a number down.

Take out what was never yours, average what is, and let the same amount arrive every month, the way it does for everybody else.