How to Budget with Irregular Income | theSkimm
Budgeting With Inconsistent Income

The Story

Budgeting can be tough. It’s even tougher when your cash flow changes more than Ross and Rachel’s relationship status. Hi, freelancers, hourly workers, side hustlers, entrepreneurs...and anyone else whose earnings are all over the place.

I assume you’re going to tell me how to do it anyway.

Yes. Start by pulling out recent paystubs (or looking at your checking account) to find the lowest amount you’ve made in the last few months. If you’re new to the whole inconsistent income thing, estimate what your leanest month might look like. Now you have your baseline. Aka the minimum amount you might have to cover your costs. 

That’s...not very pretty.

Probably not. But hopefully you’ll earn more than that most of the time. And shooting low gives you a buffer. Now, budget like you normally would: by organizing your expenses by needs, wants, and goals.

Related: How to 50/20/30 Your Budget

Is that it?

If taxes aren’t automatically taken out of your checks, you’ll want to account for them, too. Experts suggest putting aside 25-30% of your earnings for Uncle Sam.

Wow, okay. Anything else?

When your pay is as inconsistent as clothing sizes, you also need a little cushion...on top of an emergency fund. (That’s to bail you out when your computer breaks or your dog gets sick.) Related: Quiz: How Much Do You Need in Your Emergency Fund? This is for those months when your income doesn’t quite cut it. Or it comes in late. Because you still have to eat. When you have an especially good month, stash some of that cash in a separate account. Bonus points if you give it a clever name. Think: Hills and Valleys, In the Buff, FML. Related: theSkimm on How to Save More Money, Faster

And if I’m visiting that account a lot?

It might be time to rethink your budget.

theSkimm

Unpredictable earnings can make your financial life more complicated. But it’s not a get-out-of-budgeting-free card. You’ll still have to pay bills...and hopefully save and invest some, too. Making a game plan can help you do it all.


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