How often have we asked, “How can I make my budget work?” But, those challenges multiply when your income is inconsistent? How can you create a plan for your money when you don’t know how much you will make from month to month? Don’t worry – we’ve got you covered. Below are some tips and tricks for budgeting when your income is irregular. We’ll also give you some foundational steps to help get you started.
So, whether you’re working freelance, are a seasonal worker, or have an unpredictable income for other reasons, read on for advice on categorizing expenses and managing your finances!
Start With the Fundamentals
Before you invest a lot of time in creating a detailed budget, know where you stand. Start with a personal “balance sheet” for everything you earn and spend in a month. Since it is irregular, use your best estimate for what you anticipate earning and spending. Don’t forget to include all sources of income, even if they’re not guaranteed (such as commissions, tips, and interest). Then, list your fixed and variable expenses – everything from your rent or mortgage payment to your coffee habit.
Once you have a good idea of what’s coming in and going out each month, you can get creative with your budget. However, if your expenses exceed your income, don’t panic! There are plenty of ways to cut costs without making significant lifestyle changes. We’ll go over some strategies later. For now, let’s focus on how to categorize expenses to make the most of an irregular income.
Budgeting Tips and Tricks
There are a few key things to keep in mind when budgeting with an irregular income. First, divide your expenses into two categories: fixed and variable. Your fixed costs stay the same each month, like rent or a car payment. Variable costs can fluctuate, such as your electricity bill or groceries. It’s important to account for both types of expenses when creating your budget.
Another tip is to create a “buffer” in your budget for months when you know you’ll be earning less. This can help prevent you from getting too far behind on bills or other payments. You can also use your savings to cover lean months, but be careful not to dip too far into your emergency fund.
Last but not least, don’t forget to factor in irregular expenses when you’re budgeting. This could include anything from car repairs to annual insurance premiums. By setting aside money each month, you can avoid being caught off guard by these larger costs.
If your income is inconsistent, one of the best things you can do is to under budget your income and over budget your expenses each month. For example, you may budget $1,000 for your weekly income but find yourself making an extra $50 one week and an extra $100 another week. That is an extra $150 bonus income. Of course, the worst thing would be finding out you didn’t put aside enough to cover your expenses. But, conversely, it’s much easier to save money when you have a little extra each month. You can use this “fun money” to cover unexpected costs, splurge on a nice dinner out, or save it for a rainy day. Plus, reaching the end of the month with more than you planned is a great surprise.
Track Everything Very Carefully
When your income is irregular, it’s more important than ever to keep track of your spending. This way, you can see where your money is going and adjust your budget as needed. There are several ways to do this, from using a budgeting maker app to simply writing out your expenses each day. Find what works best for you, and be as detailed as possible.
Plan in Advance
Before each month, you should already have your budget planned. This allows you to factor in the differences from the previous month and prepare for upcoming expenses. For example, if you know you’ll be traveling for work in the coming month, budget accordingly and set money aside. By being proactive, you can avoid surprises and stay on track with your finances.
Savings are Mandatory
Irregular income means that even if you have the perfect budget, you might need emergency cash from time to time. So make your savings a mandatory part of your budget, like a bill you have to pay. Think of this as your “rainy day fund” that you can dip into when times are tough. The key is to only use this money for true emergencies, like job loss or unexpected medical bills, or an unexpected but necessary home repair.
Track and Evaluate
Even with an irregular income, there are still likely patterns in how it ebbs and flows. Track your income and expenses over time to see if you can identify any trends. This information can help make predictions for your budget in the future. This is not a one-time process. Schedule regular budget reviews to understand your financial cycles. A quarterly review will give you a good chance to identify some typical expenses that are unplanned for. Maybe you tend to spend about $50 each month on little treats at the corner store. A yearly review will give you a more complete picture of your finances’ typical ups and downs each year. The annual review will allow you to plan for the upcoming year to avoid any surprises in your lowest months. Use CalendarBudget’s High/Low balance indicator to look forward to see at a glance when your high moments and low moments will be. Use the high moments to set aside extra savings to prepare for the low moments. Repeating this process won’t only avoid financial crashes you faced in the past but also has great potential to save you a lot of money from no more overdrafts or late fees. Interest is also saved on any debts you can pay off earlier with newfound money.
Adopt a Frugal Mindset
You don’t want to be cheap, but you also don’t want to waste money needlessly. When your income is irregular, it’s important to be mindful of your spending. There are plenty of ways to save money without making major lifestyle changes. For example, you can cook at home more often, shop for sales, and cut back on unnecessary expenses.
You should also focus your purchases on the things you really enjoy. You might splurge on a weekend getaway rather than buy a new piece of furniture. By being mindful of your spending, you can make the most of your income—no matter how irregular it may be.
Income Stabilization Fund: What is it?
This is another way of saying an emergency fund but specifically for when your income is irregular. You set aside money each month to cover lean times or unexpected expenses. The key is to make this a mandatory part of your budget, so you’re always prepared.
How Do I Prepare a Budget if My Income is Inconsistent? Use Our Budget Marker App!
Ultimately, the best way to prepare a budget if your income is inconsistent is to track everything very carefully, plan in advance, and adopt a frugal mindset. One of the best ways to do this is by using CalendarBudget’s strength to allow you to plan ahead. By putting your money plan on a calendar, you will never miss a bill, can prepare for your sporadic fluctuations in finances, and can visualize everything from bills to income to spending patterns, all in one place.
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