How to Budget When Your Income is Inconsistent

When you can’t predict your paycheck you can still be proactive

Photo: Sam Dan Truong/Unsplash

Proactively planning your budget is a key habit for ensuring financial success. By assigning your money to cover your upcoming expenses at the start of each month, you can rest assured knowing that you have enough money to pay your bills. For those on a salaried income, budgeting in advance is a more straightforward task.

But for those with a fluctuating income, it can be challenging to anticipate how much money you’ll have to cover you for the upcoming month. If you can’t always predict your income, here are a few things that you should do to create an effective budget to set yourself up for financial success.

1. Plan for your lowest income estimate

Despite the uncertainty of a fluctuating income, you can anticipate your worst-case scenario. For example, if you’re self-employed, you’ve probably had a ‘lowest-earning’ month in your career. Or, if you’re a server who relies on tips, you can use a lower tipping month as a reference point. You should always plan to receive your worst month’s income.

By budgeting with your lowest anticipated income, you ensure that you can cover your essential living expenses even if your paycheck is on the smaller side. If you overestimate your income, you run the risk of being unprepared to cover your necessary bills.

2. Spend your money on paper first

In other words, write out how you will spend your money in a planned budget for the upcoming month. After you have determined your lowest income estimate, you need to assign every dollar a job. This step is crucial; take your predicted income and plan out how you will spend it before the month begins. Itemize your monthly living expenses in order of priority and assign your money to cover your most pressing bills first.

By creating a budget based on your lowest anticipated income, you know that you can cover your living expenses during your worst-case scenario.

The only change to your budget will be if you end up earning more money than you planned for, which is not a bad problem to have.