My First Self-Employment Paycheck

I have decided to start paying myself every single month. I’m going to get a paycheck! Well, not a paycheck, an auto-transfer from my business account to our personal accounts. But still. Regular money coming in.

Here’s how things have been running so far: I let my business income build up in my business account and sporadically take distributions from it as needed (e.g., when we incur childcare expenses so I can work) or if December 31/April 15 is approaching or just when I think the balance is unnecessarily high. (A note on “unnecessarily:” I’ve been keeping a healthy buffer in my business account because I often pay for travel expenses up front that will eventually be reimbursed – like months later – and I want some cash available for potential re-investment.)

This system is working for us personally because our short-term expenses (and retirement savings) are paid out of Kyle’s income alone. (Our recent rent increase made that proposition more difficult, but we were able to mitigate it by lowering the income tax withholding on Kyle’s paycheck.) When I take distributions from my business account, the money immediately is split up according to pre-set percentages for our tithe, our retirement accounts (/529 substitute), taxes, our house down payment fund, and childcare if needed. None of it goes to our day-to-day living expenses. (The same goes for my side hustle income – straight out or into savings, nothing to our living expenses.) So there was no personal need for me to pay myself regularly.

However, I think psychologically it might be better for me to take a paycheck, even if that paycheck goes straight into savings. I don’t want the gradual growth in my business account balance to trick me into thinking I don’t need to hustle to earn more or can re-invest anything available. I want a bit more of the motivation to earn (desperation?) that entrepreneurs sometimes talk about. Even though we won’t use the money for our current living expenses, it is important for me to keep increasing my income for when we go to buy a house (both to fund the down payment and to qualify for a larger mortgage).

My choice at this point is whether I want regular income from both my self-employment sources of income together (my business and my contractor work) or just my business. My contractor income varies each month, so the question is whether I want to pay myself a variable amount from my business to supplement the contractor income or to let the contractor income be what it is and pay myself a regular amount from my business. It’s six of one half, dozen of the other but I’m choosing the latter. I don’t want any additional incentives to over-work myself on my contractor income when I’d rather focus on my business. (In fact, now that I’ve been consistently meeting my 20 hrs/week overall work goal, I am switching to putting 20 hrs/week into my business and the contractor work will be on top of that.)

I have now set up the first regular paycheck I’ve received since my last grad school paycheck three years ago!

Do you pay yourself a regular salary if you have an irregular income? What do you do with a second income if you live completely on the first?