How to Budget on an Irregular Income

Learning how to budget on a consistent income can be hard enough for some. Learning how to budget on an irregular income, on the other hand, can seem daunting at best. After giving up my safe career at a hospital working as an X-ray Tech in order to pursue my passion for photography, there was a certain learning curve that came along with it when it came to budgeting.

Jon has been self-employed since 2003. To a certain extent, he was already used to budgeting on an irregular income. But once I came into the picture, and we both were self-employed, it seemed like we had to take our budgeting skills to a whole new level.

Since we became an entirely self-employed household in 2014, we’ve learned way more about how to budget on an irregular income. Today, we’re sharing three ways we keep our finances in check regardless of whether our income that month was more than enough or less than impressive.

List Your Expenses From Most Important to Least Important

Anytime we go to set a new budget, we always lay out all of our expenses. Whether they’re recurring or not, we list out everything we spend our money on each month. These expenses can include utility bills, car insurance, health insurance, mortgage, groceries, Starbucks runs, date nights and eating out. Next, list those expenses from most important to least important. What do you have control over, and what do you not?

The expenses that make it to the top of our list are all of our non-negotiables. Car and health insurance, mortgage, and car payments would be items you would list first. Expenses like groceries and utility bills are examples of an expenses that you have control over. There are ways to save money there if you absolutely have to.

Use this list as a guide for telling your money where to go and reminding yourself about the expenses you can save money on if you know you’ll be making less money that month.

Create a Buffer or Cushion Fund

There will be some months where you will likely make more money than you need to simply survive. During months like this is when we take some, or all, of that excess money and pad a separate savings account. This savings account is used specifically for using on our slower months when income is down.

Having a cushion fund is not the same as an emergency fund. This extra buffer is specifically for paying normal monthly expenses (like the ones listed above). We would recommend having a separate emergency fund with enough money to be able to live off of for 3-6 months in addition to your cushion fund.

Get One Month Ahead and Live on Last Month’s Income

This can take a bit of planning, but it’s completely doable. Learning how to budget on an irregular income can be stressful. By getting one month ahead, you can create a sense of security by being able to plan your exact expenses ahead of time based on the income you made the month prior.

Living on last month’s income has also helped us become more aware of how much we’re spending. Doing this gives us even more motivation to plan for what we’re spending our money on. And sometimes, it can become sort of like a game by challenging ourselves to end the month under budget. Some months, we kick that extra cash over into savings, and sometime we use that extra to treat ourselves to something special that we wouldn’t normally spend money on (like a special date night at a more fancy restaurant).

Following these three simple rules will help you to begin learning how to budget on an irregular income. It’s no fun being stressed over money. This way, you’re taking control of your finances before they have a chance to get out of control.