5 Steps To Budgeting (On An Irregular Income)

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5 Steps To Budgeting (On An Irregular Income)

Do you have an irregular income? If your paycheck varies each month, monthly budgeting can be hard, but there are a few things you can do to make it work for you. If you need a way to stay organized and take control of your budget, we lay everything out for you in our new Money Planner.

Irregular incomes can be extremely hard to budget for obvious reasons. You can never count on a set amount of income from month to month. It can leave you open to not having enough income to cover your expenses, having to draw from your savings and other financial stresses. Learning how to budget your irregular income can help prevent those and other financial crisis moments from happening.

Here’s what you can do to make budgeting on an irregular income work for you:

1. Determine your average income.

To do this, take the past 3 or 6 months’ income and add each month up. Take the number you are left with and divide by the number of months that you added (3 or 6). This will give you the average income that you make each month. You will use this average when figuring your budget.

2. Create your budget.

Just like you would normally do, create a budget based on the average income you found in step #1, create budget categories and assign income to your expenses. Ideally, you should have fewer expenses than you have income. Once your expenses are covered, be sure to place any income that you have left over into your savings account. Doing so will allow you to build a buffer of savings for yourself so that your budget can handle a month when your income might fall below your average (which absolutely will happen from time to time)

3. Skim your expenses.

When budgeting an irregular income, you really want to skim your expenses down as far as you can. To do this, consider your “must-cover” expenses first. When you put your budget together, make sure that you budget enough to account for these expenses before anything else:

Rent or mortgage
Utilities
Groceries
Gasoline and car-related fees
Must have medical costs

4. Budget for non-necessities.

Once your main expenses are covered, you’re free to account for any budget items that aren’t necessary such as entertainment, extra-curricular activities for your kids and so on. If you need help searching for discounts on free meals or fun activities you can do with your family, we have a list updated monthly here. When your income is irregular, it’s incredibly important to make sure your basics are covered, and as much as you can put money into savings to bulk up that savings account when you’re first starting out. Be sure to focus on covering those primary expenses first, then take care of a few non-necessities, and finally add any excess income into savings to cover months where your income is less. If you are looking for ways to save money on food when you do go out to eat, you can save quite a bit and score a lot of free food by using the apps through the restaurant.

5. Bulk up your savings.

After a few months of budgeting, especially focusing on those main expenses, work towards building up your savings so that you can cover up to a full month or more of your budget using your savings account. Once that happens, you can officially live off of last month’s income, which will allow you to constantly stay one step ahead of yourself and your expenses. Living off of your previous month’s income can take the financial stresses of having an irregular income away and give you a sense of peace about your financial future. If you’re new to budgeting and totally lost at where to start, I highly recommend checking out Dave Ramsey’s Total Money Makeover ~ you’ll learn more tips and strategies to help you live on a budget, no matter your income.