7 Steps to Build a Budget with Irregular Income
Working in a job where you aren’t paid consistently can make it difficult to devise a budget that works for you. The key is to put away enough money when there is extra to get you through the times when you have less.
How do you do that? Whether you’re a motivational speaker, salesperson, restaurant server or freelancer—or any of the other hundreds of professions that don’t garner a standard paycheck—managing your money well is imperative to financial success. There are several strategies you can employ to streamline your budget.
Write down your monthly expenses. The first step is to list all your necessities—things like mortgage, car expenses, transportation, food, insurance and childcare. These nondiscretionary expenses must be covered monthly to survive. Estimate for ongoing expenses that fluctuate, like groceries, gas and utilities, as well.
Calculate your monthly discretionary expenses. This list is all those things you could live without if you had to—but don’t want to. Think cable TV, streaming services, subscriptions, membership dues, entertainment expenses and eating out. Sometimes, you have no idea how much you’re spending on these things until you start tracking it. This is a great time to cut and consolidate where possible.
Get paid. This is all about creating structure in a non-structured environment. Most people prefer to have a routine. One way to do it is to channel all your income into a traditional savings account and then automate weekly or biweekly “paychecks” to your checking account. This helps to avoid overspending when you’re pulling in more money and ensures your primary expenses are met when there is less.
Build a buffer. Ensure you don’t run out of income by building a strong financial buffer to rely on when business is slow. For someone with inconsistent income, that buffer should ideally be one year’s worth of nondiscretionary expenses. In addition, it’s recommended that you also build an emergency fund, with three to six months’ worth of core expenses.
It may be difficult for you to imagine setting aside this amount of money, but it doesn’t have to be done all at once. It may take a year or two to get it where you want it. Once you’re there, work on a maintenance strategy—build your cash reserves during the busy times and spend it down as gradually as possible when it’s slow. If you find that you’re spending your reserves too quickly, it’s time to revisit your discretionary spending to evaluate where you can cut back.
Keep your eye on the prize. Don’t worry about your day-to-day survival so much that you neglect your long-term goals. No matter how long it takes for you to build your buffer and emergency fund, you should always be working on your life plan. Revisit your long-term goals, like saving for retirement or a down payment on a home and adjust them if necessary.
Do something for yourself. Budgeting with a fluctuating income takes commitment. But that doesn’t mean you aren’t entitled to have a little reward here and there. When you have a particularly lucrative day, week or month, and after setting aside the cash you need, it’s perfectly reasonable to treat yourself. You need a little positive reinforcement to carry you through your budgeting process.
Enlist some help. You don’t have to do this all by yourself. If you’re not comfortable with finances or you want to get another opinion on things, all you need to do is reach out. A knowledgeable financial professional can offer advice on how to structure your budget, ways to grow your money and options to achieve your long-term goals.
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