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How to Put Together a Budget on an Irregular Income

Posted by MoneyKey on May 15, 2019

Trying to balance your budget can be tricky when you think about having to account for every little expense you go through in a month. But things become even more complicated when you don’t have a consistent stream of income coming in every payday. This may be more common than you think. In 2018, over a third (36%) of U.S. workers were a part of the gig economy. This usually means that they’re in between full-time job, having a hard time finding full-time work after a layoff, or looking for more flexibility in their work schedule.

What this also means for many is that they may be having a hard time putting together a budget when they don’t know exactly how much money they have coming in each month. If this sounds like you, we’ve put together some tips to help you put together a budget when you have an irregular income.

Calculate your essential monthly expenses

You’ll need to start this process by figuring out the minimum amount of money you’ll need to get by for the month. Make a list of all the essential monthly expenses that you can’t ignore. This should include things like rent, groceries, utilities, transportation (car-related expenses, public transportation), and any other essential expenses.

calculating your monthly expenses

It’s easy enough to factor in the cost of things expenses that stay the same from month to month, like your insurance and rent payments. But things expenses like your groceries and utilities can change, so you’re going to need to take this into account when you’re making your bare-bones budget. To get a reasonably accurate number of what you spend on variable monthly expense, figure out how much you’ve spent, on average, on that expense over the past twelve months and plug that number into your budget.

While you’ll need to include these essential monthly expenses, there are other things that you should try to include if you have the room in your budget. These can include things like monthly savings, retirement savings, and any outstanding debt repayment.

If you need help getting your budget started, take a look at our Ultimate Budgeting Guide to get an idea of a few different budgeting techniques that may work for you. If you prefer to manage things from your phone, take a look at these personal finance apps that can help you budget and effectively manage your finances.

Add in your discretionary expenses

You should now have a pretty clear idea of how much money you’ll need every month just to get by. Now it’s time to start calculating your discretionary expenses. These expenses fall under the category of “wants” more so than “needs”. This can include things like a night out at the movies, going out for drinks with friends, an expensive gym membership, and anything else that you can live without.

To make sure you’re accounting for everything that could fall into this category, go back and look through all of your bank and credit card statements, and start cataloging these expenses.


calculating your discretionary expenses

After creating your bare-bones budget and making a list of your discretionary expenses, you might feel a little dejected if it’s looking like you’re going to have to give up some of the things you love just to make ends meet. While you may have to make some sacrifices to keep your budget intact, this doesn’t necessarily mean you have to give up the little things in life that keep you going. For example:

  • Love exercising but can’t afford the price of a gym membership. Learn how to stay in shape without joining a gym
  • If you need a vacation but can’t afford a remote getaway, there are ways to travel on a budget breaking the bank! You may also want to consider sticking closer to home and take a road trip on a budget.
  • If you need new clothes but can’t afford a pricey shopping trip, visiting some nearby thrift stores may be just what you need to get some great items at an affordable price. Here are some tips to help.

Build up an emergency fund

An emergency fund is exactly what it sounds like. It’s an easily accessible fund that’s used to cover an unexpected expense that can’t be ignored. This might be an emergency medical bill, a car repair, a flood in your basement, or anything that requires your immediate attention. If your income fluctuates and unexpected expense pops up during a lower income month, you’re going to need to have a way of dealing with it without dipping too deep into your normal budget.

Some experts suggest putting aside three to six months worth of expenses to get your emergency fund started. This might be easier said than done when you’re making barely enough money to cover your basic living expenses, let alone being able to contribute to your savings. If you’re still having trouble cutting out some of your discretionary expenses, take a look at these tips to help you find some extra savings each month.

If an emergency strikes before you’ve managed to save up enough to handle it, consider taking out an online loan with MoneyKey to hold you over until your next paycheck. These loans are meant to help you deal with an unexpected expense when it can’t be ignored, and you don’t have the finances to deal with it right away.

Pay yourself a reasonable salary

pay yourself a reasonable salary when you're on an irregular income

While you may not have a company paying your salary, that doesn’t mean you shouldn’t be paying yourself a salary. When you’ve been working with a through budget for long enough, you should have a better sense of how much you spend each month, and how much you can afford to pay yourself moving forward despite your inconsistent income.

Use your last month’s budget as benchmark for how much you should pay yourself. Combine the amount you spent on the portion of your budget that’s designated for essential expenses with the amount you spent on discretionary expenses, and deposit this amount into your account at the beginning of the month. This should hopefully be enough to cover your expenses for the month, and anything left over can be put into your emergency fund. This way, you’ll limit your spending to the money you actually have.

Pay your bills with a zero-sum budget

The purpose of a zero-sum budget is to make sure every dollar is getting spent smartly. This means that no dollar goes unspent.

When the month is finished, you shouldn’t have any money left in your checking account. As an example, if you have $100 left in your account, this money needs to go towards a specific purpose. It could go towards your emergency fund, towards paying off any outstanding debt, or it can be used to contribute to your retirement fun.

To start using a zero-sum budget, you’ll to begin by going through every item on your list of essential expenses and your discretionary expenses. After everything is paid off, take whatever extra money you have and put it towards something useful. Keep in mind that you’ll need to keep a close eye on any of your normal variable expenses like groceries, entertainment, and anything else that fluctuates. You’ll want to make sure you stay below what you’ve previously spent on these things.

Don’t let your irregular income stop you from putting together a functional budget

As tricky as it may seem at first, you can still put together a functional budget on an irregular income. Make sure to get a clear idea of all of your expenses, stick to your budget, and don’t spend more than the income you generated the previous month. With careful planning and discipline, you may be able to start seeing improvements in your financial situation!

Do you have any tips you implement to put together your budget on an irregular income? Share below!


Disclaimer: This article provides general information only and does not constitute financial, legal or other professional advice. For full details, see MoneyKey's Terms of Use.

Posted in: Financial Tips

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