Did you know that a third of Americans have an irregular income? That’s a lot of people and chances are that you are reading this as you are part of that number.
When you have an irregular income, it can be difficult to properly budget. If your income is unpredictable, then it could mean falling into financial difficulties. Budgeting can be hard even at the best of times!
In this post, I’m going to explain how best to budget when you have an irregular income. By the end, you should be feeling much more confident about managing your money!
List All Expenses
The first thing you must do is list all your expenses. Make sure to list them using the exact amounts and include everything. Housing, energy, groceries, insurance, entertainment, etc. Whatever you pay for must go on the list.
This is a great time to review how much you are spending each month and where possible cut your expenses. Try negotiating bills to reduce them or canceling subscriptions you no longer need.
Creating Your Budget
Now that you know all your expenses you can create your budget. To do this you need to base your income on your lowest expected monthly income. Check your bank statements for the last 12 months to calculate this. If your income hasn’t been irregular for that long go back as far as you can. Now that you know the lowest amount you could earn you can create your budget.
Here is an example:
Let’s say that the minimum you will earn every month is $1000. There may be some months you earn more but at the very least you will always have $1000. Your budget should be based on earning that amount. When paying expenses, you must pay priority expenses first like housing and energy. If you have leftover money or additional money some months then that can be saved, invested, or used to pay off debts.
If you find you can’t cover all expenses every month, then you should look at trying to earn more whilst still paying your priority bills. Keep reading for some free money hacks later!
What If Your Income Drops Below The Expected Minimum?
You may be in a situation where your income is so irregular it could drop below the amount you expected. This could mean you can’t pay all your priority expenses some months. To help with this here a couple of strategies to use to protect yourself.
One thing you could do is build an emergency fund. In months when you have earned more than you needed put as much as you can into your savings. If you have a bad month you can use those savings to cover the bills.
To build those savings quicker you could find extra work and put those wages solely into the emergency fund. Another tip is to sell things you no longer need on eBay or using local online groups. You could even host a yard sale! (when it’s safe of course). Any extra money you get could be put into your emergency fund to build it quickly.
Another budgeting strategy to use when you have an irregular income is to get one month ahead.
To do this the first thing you need to do is save up one month’s worth of expenses. Although this may take a while once you hit your goal it will be worth it. The goal here is to use the month’s worth of expenses that you have saved to pay the current expenses. Here is an example:
Let’s say that by the end of February you have saved up one month’s worth of expenses. In March you will use those savings for all your expenses whilst saving everything you earn in March. When April starts you will be ready to live off the earnings that you saved in March. Easy!
The great thing about this method is that you no longer need to make a budget based on guesses. You will know exactly how much you have to spend each month. If you have an irregular income this could be a fantastic way of managing your budget with less stress!
Don’t Forget To Budget For Irregular Expenses
Some expenses can also be irregular such as taxes or HOA dues. If you earn irregularly then it’s important as part of your budget that you earmark some money each month to save towards those expenses.
Often irregular pay means taxes aren’t deducted as you earn. This means you will end up with the tax bill. Try to remember to save that money yourself to avoid headaches at tax time!
Free Money Hacks
1. Surveys, Cashback, And Rewards
A great way to get cash, gift cards, and other rewards is by signing up for sites that offer these rewards in exchange for completing simple online tasks. The tasks are typically easy and include completing surveys, sign up offers, shopping online or in-store, and playing games. Sites like Swagbucks, Ibotta, and InboxDollars are great to get started with.
One easy way to earn cash is by testing websites and apps. Many companies pay ordinary people to do this for them. You just need an internet connection and a microphone to get started. Some tasks can also be completed via smartphone.
You will need to follow some instructions to complete a short test of no more than 20 minutes. The company is paying to hear your thoughts on the process. This means you must be comfortable being recorded by audio or video. Tests pay $10 to your PayPal up to 7 days after completion.
3. Sell Second-Hand Items
A side hustle that can often be a good earner is selling second-hand items. To get started you could sell your own things and ask family or friends for unwanted things to sell.
Once you’ve done that start looking for things to buy from yard sales, thrift stores, or online groups. The trick is to find things that are selling cheaply that you know you can sell on for a profit!
To sell your items try using eBay, Decluttr, or local online groups.
Just because you have an irregular income doesn’t mean you have to struggle financially. Creating a realistic budget using these methods means you can enjoy financial freedom and start saving to fulfill your dreams!
About the Author:
Hey, I’m Chris. I have a degree in Business Economics from the University of Liverpool, own a small fast food business and run LifeUpswing.com. I will help you to make money, save money, and think about money in a way that will give you back your freedom.