A Twin Cities connection of mine, Jerrid Sebesta, is a fellow hard-core money mastering fool like myself.  He’s also a meteorologist.  Why anyone would study meteors is beyond me.  They’re too fast…and haven’t you seen what will happen to Earth some day?  Just ask Bruce Willis and Morgan Freeman.

“ooh how I wish it would rain down…”

Jerrid is also a guest-blogger who contributes to the Life & Money section of momslikeme.com. His most recent articles on personal finance touch on the dreaded “B” word, a topic I’ve written about quite a bit as well.  In an article entitled, Budget Basics, Jerrid shows you a simple spreadsheet budget for the average income earner, whereby every penny is spent before the month begins.

If you aren’t familiar with this concept, get familiar.  It’s critical to your financial success.  Before you start your month, you need to assign a destination for all of your money, yielding a zero balance before the month starts.  In other words, if you make $4000.00 net in one month, all $4000.00 needs to be given a name and a place.  This will help you avoid the “too much month at the end of your money” problem, as Dave Ramsey says.

But what happens to your budget when you don’t have a regular income?  How do you assign your money to an expense plan if you’re 100% commissioned?  It’s easier than you’d think.  In Jerrid’s example, there’s only one thing that I would change, and it’s simply a preference.  I would prioritize the expenses on the spreadsheet.  For all intents and purposes, the result would be the same in his example, so it’s not too much to fret over.

For those of us who don’t know when we’re going to get paid next, it’s critical that we use a prioritized spending budget. It’s pretty much the same concept, and the end result is similar.  The major difference is that with a regular income, you’ll be able to balance your monthly budget so the resulting difference between your income and expense is zero.  In a prioritized spending budget, you’ll probably have a negative number at the bottom of your page until you get paid.  Some months you’ll see a loss, some months you’ll see gains.

Whatever it may be, you’ll need to start by listing your expenses in the order of priority, always starting with the 5 basics in this order:  1) food, 2) utilities, 3) housing, 4) transportation, 5) clothing.  Continue with all of your other expenses as you know them, and then when you’ve got everything written down, begin asking yourself the following question.  “If there was one thing that I absolutely had to spend my money on this month, what would it be?”  Put a #6 next to that thing (you’ve already got #1-5).  Ask the question again, and put a #7 next to that.  Keep going until you reach the end.

If after you cover your basics, you’re out of money, then you need to make some serious changes.  You either need a new job, or you need to lower your housing lifestyle (remember, no more than 25% of your take-home pay.)

Be careful though.  With a prioritized spending plan, it’s much easier to stray from the plan, because you don’t know how much you’re going to make, and you may hit a big sale one month, giving you the false sense that you’ve got all kinds of money.  Don’t fall into that trap.  In fact, when you start to refine your craft to the point of making a regular average income, you can modify your spending plan to reflect a steady figure.

For instance, if in 2009 you were paid $64,000 in commissions erratically in only 4 months out of the entire year, then you can create a baseline target goal of +/- $64,000 for 2010.  Then, because you don’t know if the year will be as good as the previous, write your budget based on a $42,000 annual income, and stick to it, socking away all of the extra money for a rainy day.  If you continue to increase your income over time, you can adjust your “salary” to fit better.

A common mistake people make is to see that big commission check as a huge bonus that they can just spend, because, “hey, I’ll sell the same deal next month.”  Not a good plan.  Tighten your lifestyle so that it doesn’t bleed you dry.

Whether it’s a prioritized budget for the unknown income, or a steady budget for someone who knows how much they’ll be paid every month, having that plan will not only result in financial success, simply knowing the details will alleviate all kinds of stress in the family.  Don’t be frustrated if you don’t get your budget right the first time.  If you do, you’re a superhero.  Trust me, you will make mistakes and it will take a few months to refine it and deal with the various compromises you and your spouse may have to make to dial in a good plan.  Remember, if you’re married, you both have a vote.