How to Budget When You Don't Have a Steady Income

For some, the days are gone when they could count on a steady income to pay the bills each month. In fact, I see more and more people trying to get ahead each month working multiple jobs, freelancing or owning their own business. Whether you work on commission, have irregular working hours or are a business owner, you understand the pressure of not having a steady income. It’s hard not to worry when you are in this type of financial situation if you will make it until your next paycheck to meet your expenses.

I have many clients who simply think it is impossible to budget under these circumstances. In reality, the opposite is true and it is so much more essential to budget when your income is inconsistent. To help you with this, I’ve come up with some tips to make it easier to budget when times are tough, and you’re spending more time highlighting paycheck day then budgeting.

1. List Your Necessary Expenses

This is everything you HAVE to pay for, including rent, car, gas, insurance, etc. Consider these expenses your baseline and your basic survival expenses. Don’t include frivolous expenses, such as takeout food and manicures. Be sensible and look at what you need to pay for to live.

2. List Your ‘Not So Necessary’ Expenses

Go ahead and list the “I wants” here. Here’s where you add in the eating out, shopping and entertainment. These costs usually vary from month to month, so they may be hard to predict, but take a look at what you’ve spent on them in the last few months. These are called “discretionary expenses” because you really don’t need them. Either way, average that out so you have an idea of how much these discretionary expenses are costing you each month.

3. Figure Out How Much You Make

A tough question I know, and when it varies,how do you include a number? Look through your paystubs and bank account. What’s the least amount you’ve ever made? What’s the most? Take that minimum amount you’ve made and use that to start. Next, see if that minimum income amount will at least cover your necessary expenses. If yes, don’t consider it a free-for-all to increase your discretionary spending. If your least is an extreme, take the most and the least and average it out. Try always taking the least amount possible so you have enough to cover the basics, a little for fun, and some extra left over for step #4 — to cover yourself for when you get a smaller than usual paycheck.

4. Put the Extra Away

Your minimum from #3 is how much you should be taking out. I advise to put the rest away, build some money in the bank, and live lean so that you can continue to build your business or pay off certain debts. This way when you have a slim month, you have something to fall back on. This is also a good safety net for those unbudgeted expenses—which are sometimes necessary, but not a necessity.

This Method Does Work

I had one client who lived paycheck to paycheck and couldn’t understand how she never had any money. It turned out she made a lot of money and had plenty to pay her bills each month, but never realized it because she didn’t budget! Once we set her up with a budget, she was able to live more comfortably and put money away for a rainy day or a lean month. You, too, can have money left over and leave that paycheck-to-paycheck lifestyle behind using your income to cover both discretionary expenses and to put away for the much leaner months.