Self-employment, Income Extremes, and Early Retirement Planning

[Much Fishing to Do]

Just joining the community after long time lurking.  Wondering if there are others like me who are long time self-employed and laugh (or cry) at the question, how much do you make per year? or try to do any planning whatsoever, which is always based on such a number. 

I've never really had a "real" job and after years of temp/consulting soul sucking but fairly well paying (~$120k) much time traveling away from family, work, I started a business and work it almost all from home.  I've had $50k years and have had a $300k year, with no idea how the next one will be.  It beats the hell out of the previous work as there are aspects I take pride in from it, but is extremely stressful and extremely time consuming (working from home allows me to see the family, but there's never much free time so I'm generally saying no to doing anything).

I am 44, married to amazing SAHM with 3 school age kids, have $1.1 M saved in investments and a $200k paid for house and $200k in 529s (which I consider "complete" for the 3 kids now).  We mostly try to ignore whatever income I make for the year as it means nothing for the next and basically buy/spend on whatever we want that doesn't tweak our "unreasonable" bone, which generally works out to about $70k/year (with 2 notable extreme expenses of about $14k of that going to health insurance/medical bills/dentists etc and $10k for traveling as a family which is truly our guilty pleasure, though I find myself often working on these trips).   We do have a "low spend" month every January, after the December excess, mainly to see how much we would need to spend if we were being very careful with our spending, but still living the "good life", and that works out to about $4500 for the 5 of us ($1k of that is family med ins premium).   I am well aware this level of spending makes me a poor mustachian!

Not having a real "per year" income to base the reasonableness of our spending off of makes a lot of what I read in re: spending/savings not easy to apply to us and makes planning near impossible.

I'm generally trying to keep myself motivated to keep cranking away at the business while I think those big wins are still possible in the near future and basically tell myself for now in 3 years is when I'll evaluate where I'm at and my choices.  Once I wind down this business it would be extremely unlikely for me to ever make that kind of money again (mainly coming from those big wins) as I would never go back to the previous work, so don't want to pull the plug too early when each year right now 'may' make such a difference.

[arebelspy]

Welcome to the forums!

Not having a real "per year" income to base the reasonableness of our spending off of makes a lot of what I read in re: spending/savings not easy to apply to us

The basics still apply, even when you have irregular income. 

Optimize your spending as much as possible.  Spend only on things that have true value to you.

Save as much as you can.

This applies whether you made 50k that year or 300k that year.

long time self-employed and laugh (or cry) at the question, how much do you make per year? or try to do any planning whatsoever, which is always based on such a number ... and makes planning near impossible.

As far as planning, I'd probably make 3 different projections: worst-case, average (expected), best case, and know the truth is likely somewhere in between those.

All of us making projections have huge assumptions that may or may not be the case.  You'll just have a bit broader range.  :)

[morning owl]

I am self employed. I keep a relatively large stash of cash to balance out the slow months, and I plan my spending using YNAB. I'm not supporting a family though -- no kids, and my DH has a steady-ish job. It does make it very difficult to plan for the future, so I basically just take things one month at a time. I try to invest a percentage (>50%) of my pay per month, while setting another percentage aside for taxes. I make sure to have at least two months expenses in my cash account, and track this all with budget lines in YNAB.

There's a video tutorial on YNAB's site for how to manage irregular incomes. I highly recommend it! They outline various methods, as YNAB is quite flexible. The approach I take is to have a line in the plan for "deferred income." On months when I'm payed larger amounts, I fill this budget line to the max, so that I know I'm covered for slower months. I also have lines for savings, so that each month I can out aside a fixed amount into my RRSP and tfsa, and a flex amount into my taxable investment account, once the other lines (including deferred income) are maxed out.

If you're spending 70k a year and on some years earning only 50k, then it sounds like having a similar saving and spending plan might be useful.