Whether you’re working for yourself or have an irregular job schedule, budgeting on an irregular income can be tough. You still have to pay your bills, but you aren’t always sure how much money you’ll have. But creating a budget for this type of income is easy to learn!
Perhaps you would like someone to describe irregular income and give examples. According to American Progress, there are millions of Americans who are self-employed. If this is you, or you work as a freelancer or a contractor, your income is dependent on how much work you do, which makes your income irregular.
And sometimes the work you’re doing now won’t pay for another 30 to 45 days!
If you work in the service industry or another hourly job with a rotating schedule, your hours and income can vary from week to week.
Similarly, if you have a sales job where you earn a commission, it can be hard to determine what your actual income will look like at the end of each month. Entrepreneurs and people who work in the gig economy may also face irregular income challenges.
So how do you budget when you don’t have steady paychecks? It may seem that budgeting with a fluctuating income is impossible. But there is a way to best approach your finances that will allow you to be successful with managing your money and give you peace of mind.
Budgeting when you have an irregular income
A budget is a plan for your money. When you have a predictable monthly income, creating a budget with budget categories that work for you is a little more straightforward (though it still has its challenges).
When your income varies, making a plan for your money can be more work, but it can be done. Here are five tips to help you create a successful budget on an income that changes.
1. Create your baseline budget
You can also call this your bare bones budget. The total amount of these expenses is the minimum amount of money you’d need to earn each month.
The expenses include necessities like your rent/mortgage payment, utilities, food, and car payment. It does not include going out to eat, shopping, or entertainment — remember, it’s the bare minimum amount of money that you need to get by.
For some of these, you’ll know exactly how much you’ll be spending every month (e.g., rent/mortgage). For others, you may have to do some digging to figure out how much you should expect to spend.
By doing this, you’ll be able to determine how much you need to have coming in at the very minimum. Additionally, if you earn more than your baseline expenses you can put the extra money aside for any lower income months you might experience.
Budgeting tools and strategies
You can use a number of the best budget templates and tools to categorize past expenses and determine how much you’re spending every month.
Additionally, you can use expense tracker apps to figure out how much you’ve been spending. Then you can use those numbers in your baseline budget for the current month. But you can also use a simple spreadsheet or a spending journal that helps you keep track of your money.
Once you know how much you’re spending, put all the information into a monthly budgeting strategy that lists all your necessities and their costs. Add up the total, and you have the amount you need to get by each month.
You may choose a budgeting app or simply write your budget down. Just make sure you know your numbers and you choose a method that works well for you.
Pro tip: A calendar can also be very helpful to remind you when specific bills need to be paid.
2. Prioritize your essential and non-essential expenses
Your expenses need to be listed in order of importance so you know what to pay first. For instance:
Essential spending
All of your essential expenses should come first with an irregular income, but you can prioritize them. Prioritizing means determining what bills need to be paid first, second, third, etc.
For instance, housing, food, and transportation could be items 1, 2, and 3 on your list. Having this priority in place ensures that you are properly allocating your money to your top budget items first when you get your paycheck.
It’s also important to note that your emergency fund and any other savings are essentials that should also be taken care of before discretionary spending.
Discretionary spending
Once you create your baseline budget with your necessary expenses, you can add to the list your non-essential expenses or discretionary spending. Things like eating at restaurants, going to the movies, and gym memberships are considered non-essential spending habits.
Prioritize your discretionary spending in order of importance for times when you have extra cash.
Doing this may involve making some difficult decisions and cutting things that you can’t currently afford to avoid overspending.
For instance, going out to eat or that Netflix subscription. While you’re figuring out your budget, it’s important to remain focused on your goals and learn how to stop spending money on non-necessities.
3. Save for future months during the months you earn more
Having an irregular income means you’ll have good and not-so-good months. You can hope that your income will increase over time, but that’s not always the case. Lots of things, like seasons, can factor into how much you’ll be making.
Have a specific account to draw money from when needed
If you happen to earn excess money in a certain month, pay for your most important expenses first (as discussed above). This includes all your necessary expenses and saving goals.
Then, whenever you have a month that you make more money, add some extra funds to a separate account.
These savings will help you in future months in the event that your income declines again. Or if you have unplanned life circumstances that require you to spend a lot of money at once. Saving can help you cover your expenses during those months without having to leverage credit cards, leading to debt stress.
Sinking funds
It’s also a good idea to establish sinking funds. A fund like this is specifically for large upcoming expenses that you know you’ll need to pay for.
You should contribute to this as often as possible. That way, you will have the money you need when the time comes to pay annual expenses or one-time costs.
To find out how much to save, consider all of your upcoming expenses. Both those that are recurring and those that will only happen once.
You can add up the cost of all of them and then divide that amount by several months or divide it up through the whole year.
If you find that your earned income doesn’t pay for as much as you would like it to, there is another option: earn more!
Ideally, your irregular income provides for your living expenses. But if you want more discretionary or saving money, try some of these ideas:
Side hustle
You might try starting your own business or easy side hustles in order to earn more. It can be something that you do in addition to your full-time job that doesn’t take up too much time. The great thing about this is you can potentially earn as much as you want!
A side hustle could be walking dogs, cleaning houses, taking on freelance writing jobs, etc. Anything that you have the talent or time to do.
Second job
Side hustles don’t work for everyone. So you can always take on a part-time job in addition to your regular one. Work weekends, evenings, or whatever schedule works for you.
You may be able to take on a job where you’re already familiar with the work, or you can branch out and try something entirely new.
But is working two jobs worth it? Make sure you have the time for this before taking on another job.
5. Define your money goals
Even though your income varies, it doesn’t mean that you shouldn’t plan for the future! Come up with a couple of money goals, then consider how much you want to save.
Even if it takes a while, getting started with your goals will help you to build momentum and know that you are moving in a positive direction with your money.
Including saving for your goals before discretionary spending in your budget is also a good way to make sure that you make progress.
Here are some examples:
Prepare for retirement
There are quite a few ways to do this, from a 401k if you have the option to IRAs or regular investing. While retirement planning can seem overwhelming, it’s actually not too difficult to get started.
Try using a retirement calculator to find out how much you should save each month and year, and then start contributing now!
Plan your vacations
Just because you have an income that varies doesn’t mean there’s no room in the budget for fun! If you love to travel, start planning a vacation to somewhere you’ve always wanted to go.
Be sure to total up the cost of the trip in a vacation budget and then set aside money with each paycheck or whenever possible.
Save up for education
If you are saving for your kid’s college education, or you plan to go back to school yourself, start saving up money and learn how to avoid student loans.
You may also wish to save for a professional goal. For instance, taking classes or gaining certifications in your career, may cost money and/or time.
Determine what time frame you’re working with (how many years until you need to use the money), as well as the full cost of the education. Then you can make a plan for your savings.
Expert tip: Determine how best to manage your irregular income
Although some people can work easily with an irregular income and don’t struggle with the paycheck uncertainty, you may find that it isn’t for you. If you find that even with a budget you feel concerned about your finances, it may be time to look for alternative solutions.
While having a varying income is completely fine, it’s totally okay to change this if you would feel more financially secure with a more stable amount of money each month. Look for a career that will allow for a steady paycheck, and continue with your budget and financial goals.
What is an irregular income with an example?
An irregular income is simply one that doesn’t pay the same every paycheck.
For instance, you might make $3,000 one month and $5,000 the next.
An income like this means that you will need to be diligent about budgeting and saving up your money for lower income months, or you may feel like you’re living paycheck to paycheck.
What is an example of an irregular income job?
An example of a varying income job is one that has varying hours, such as working in a restaurant that is much busier in the summer than in the winter. There may be times when there is more work to do and others when there is less.
Another example is if you have a job that takes on various projects, such as a freelance writer. If you are paid per project, your income can change quite a bit from one month to the next.
Can you budget with an irregular income?
Yes, you can budget with an irregular income. You simply have to prioritize and stay organized. It’s also very important that you create your baseline budget by factoring the minimum amount you need to spend on bills and also by using an average of your past income e.g. An average of how much you earned over the last 6 months.
By budgeting based on your minimum expenses and average income you can put away any earnings over your average income to accomodate for any low income months in the future.
Be sure to pay your essentials first, then your savings goals, and then consider spending on non-essentials. Following this method will help you to pay your bills without worry.
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You can budget successfully on an irregular income!
Putting a plan in place, regardless of your income, is the foundation of financial success in life. It’s all about managing your monthly expenses, whether there are fluctuations in your income or not.
Plan to revise your budget every single month, and if you fall short, each new month is an opportunity for better budgeting. Remember, you can be successful with your budget, create goals, and plan for the future!
