Commission-only income means irregular income. Sales positions are the most common types of jobs that pay commissions. Other types of employment, such as freelance work, also provide irregular income. Instead of receiving a paycheck for the same amount every pay period, those who live on commission see fluctuations in income based upon sales or production. For instance, an account executive who brings in $100,000 worth of sales volume on 3 percent commission will earn $3,000. The next month, he only brings in $50,000 in sales and earns $1,500. Living on irregular income is manageable if you budget and save.
Planning for irregular income is more difficult since commission is unpredictable. If you've been in your job for at least six months to a year, you can figure your monthly average. To simplify an example, let's say you bring in $50,000 over the course of 12 months. Your monthly income average is $4,167. In your budget, you would plan for $4,167 of monthly income and keep your expenses at or below this amount.
Save Excess Income
Some months your income will be higher than average, and you should save the excess. You may want to open up a separate regular savings account. This way, you can use your savings to cover your expenses during lean months. Although it's tempting to think you have extra disposable income, the reality is you can't always count on a large paycheck. You should also set up an emergency savings fund with at least a year's worth of average income. This may take time to build up, but plan on setting aside at least 10 percent of your monthly pay.
Along with estimating your income conservatively, you should try to keep your expenses as low as possible. Housing expenses tend to eat up most of your budget. You should keep housing expenses below the recommended percentage of 30 percent. Secure a place with a mortgage or rent payment that only takes up 20 to 25 percent of your average monthly income. With an average income of $5,250, you could spend between $1,050 and $1,313. Of course, you could spend even less if you find acceptable housing.
Taxes and Debt
If you work for yourself, you'll need to set aside a percentage of your income for taxes. The recommended percentage is 15 to 20 percent, which you'll need to deduct from your income each month. With an average of $5,250, this comes out to between $788 and $1,050. If you work for an employer, you won't need to worry about this. You may not be able to avoid debt entirely, but you should try to keep it low. If you have large amounts of debt, including car loans and credit card balances, try to eliminate it.