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Career & Finance Fridays

Money & Finances

How to Budget on an Irregular Income

Budgeting and money management are an essential part of any financial goal. But it’s a lot harder to do successfully when you have an irregular or inconsistent income. Harder - but not impossible. If you work on commission, own your own business, or rely on passive incomes that can fluctuate, this is for you.


Here’s the trick: usually, when building a budget, you start with your income, and then subtract as you add items to the list. When your income is irregular, do it backwards. Keep in mind your average income (but keep it on the low side), but make a list instead of your expenses first. Start with the necessities - rent, insurance, groceries, phone bills, then build the extras - Netflix, coffee dates, etc… until you have a solid idea of what you normally spend on those things.


Now keeping in mind the average income, figure out how much you want to save each month, and balance the difference. This is where it takes a bit of nuancing, being realistic in where you can cut back and where you’ll need a bit more. Be prepared to accept the fact that your budget is not set in stone. Because of your income flexibility, you will need to be a bit flexible also. There may be months where you have to dip a bit into your savings, and return it when you can.


This is why savings are essential (!), and being ready to give yourself a bit of grace is important too. Remember to take things one step at a time. You’re planning ahead now - which is the first and most important step!

Recommended Movie

A Perfect Murder

Michael Douglas, Gwyneth Paltrow

Interesting Fact #1

Unemployment is at a 48-year low, but but only 28% of Americans are considered financially healthy.


Interesting Fact #2

Almost 50% of Americans say that their expenses take up their whole paycheque or more.


Interesting Fact #3

Of Americans spending their whole paycheque or more each month, 40% say they have irregular income.


Quote of the day

The best way to stick to a budget is to start one.

- Unknown

Article of the day - How to Budget on an Irregular Income

You might think a monthly budget only works for people with a predictable income. But a budget allows you to tell your money where to go instead of wondering where it went—and that applies to people who live on an irregular income, too!

Why you should budget on an irregular income

Budgeting is particularly important if you don’t know what number you’re going to see on your next paycheck. Whether your full-time job is commission-based or a little unpredictable—or if you’re a budding entrepreneur with a growing side gig—a budget will show you exactly where you are in your financial journey, and help you get where you want to be.

If you know where you stand with your money, you have a greater chance of financial success. You can plan for emergencies, pay off debt, and sleep better at night knowing that you’re in control of your money—rather than your money being in control of you.

How to budget on an irregular income

This step-by-step guide will show you exactly how to create and work a budget if you’re living on an irregular income. And don’t worry—it isn’t as intimidating as it sounds.

1. Start with your lowest monthly estimate.

It’s easier to start with your lowest monthly income than to start with an average. If you budget for the smallest amount, you can always go up from there! Check out your paystubs from the last year and find the lowest one in the bunch. If this is your first time working on commission or living on an irregular income, estimate what your lowest month will look like.

2. Create your budget based on that number.

Take your lowest monthly income and use it to create your budget. Remember: You want to start with the lowest number because it’s easier to add money in the budget than deduct it.

Now prioritize your categories, starting with your four essentials—also known as your basic necessities:

  • Food. Begin with your basic food needs, like weekly grocery trips. We’ll add the extras—like restaurants and coffee shops—later!
  • Shelter. This includes your rent or mortgage payment, as well as any cost associated with living in your home (utilities, taxes and insurance).
  • Clothing. Remember, we’re starting with basics. Focus on what you need, not the shopping spree you’ve always wanted. That comes later!
  • Transportation. This can include your car payment, how much you spend on gas, and what you need to maintain your vehicle.

Once you’ve listed your four essentials, list the rest of your expenses in order of most important to least important. Make sure to include giving and savings after the essentials—and don’t forget to include insurance. If you accidentally list some of your expenses out of order, don’t worry. You can rearrange your budget categories when you’re done.

And remember—just because you have an irregular income doesn’t mean you can’t have fun! But when you’re setting up your initial budget, cover your necessities first before diving into all the extra stuff. Once you have your basics covered, you can add in things like restaurants, coffee, entertainment, and other fun activities!

3. Adjust over the course of the month.

Now that you’ve created a budget for your lowest monthly income, take it for a test drive. You might realize halfway through the month that you’re going to make morethan you originally thought.

That’s great news! But before you start spending that extra cash, make sure you add it into your budget. If you set your lowest monthly income to $5,000 but you made $5,500, simply adjust the income line in your EveryDollar budget.

Now you just need to decide where to apply that extra money—and that’s a great problem to have! You can go back to the priorities you listed, or add new ones. It’s up to you!

4. Create a Hill and Valley fund.

There are hills and valleys in every business. Sometimes you bring in more than average, and that’s great. But sometimes you experience a slow season, and you need to pull from savings to make ends meet until business picks up again.

That’s where the Hill and Valley fund comes in.

The Hill and Valley fund prevents you from dipping into your emergency fund when your paycheck is smaller than you thought it would be. It helps you pay your bills and keep food on the table when your monthly income is less than your monthly expenses.

It’s easy to get started. Remember the above example where we talked about adjusting your income for the better when you have a good month? When that happens, allocate some of your extra earnings to the Hill and Valley fund. Easy as pie.

Over time, the Hill and Valley fund will grow—just like an emergency fund. It may be tempting, but don’t skip this step. It will provide a nice buffer between you and those hard months when business slows down or you need to work less for a season!

5. Copy your planned amount to next month.

Once you have a list of monthly expenses and your Hill and Valley fund, you can use this budget as a template for the next month. Let EveryDollar do the work for you. It will copy the previous month’s budget into the new month, and you can make any necessary adjustments from there without creating a new budget from scratch.

Tips for budgeting on an irregular income

Create a Miscellaneous category.

We all have unexpected expenses pop up that we either didn’t expect or forgot to plan for. That’s where the Miscellaneous category comes in handy. Allocate funds to a Miscellaneous category so you have a safety net in case an expense comes up that you weren’t anticipating.

Give yourself some grace.

It won’t be picture-perfect the first time. You may forget some things or not budget enough for groceries. But don’t stress—and don’t give up! It takes about three months to get into a budgeting rhythm. Keep your eyes on the prize and learn from your mistakes as you go.

It might seem tricky at first, but stick to it. Just because your income is unpredictable doesn’t mean your budget needs to be unpredictable too!

Question of the day - Would you rather have a set income or have a riskier but potentially greater income?

Money & Finances

Would you rather have a set income or have a riskier but potentially greater income?