How to Budget When Your Income is Inconsistent

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h1 id="3cf2">2. Spend your money on paper first</h1><p id="3db9">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 <i>before</i> the month begins. Itemize your monthly living expenses in order of priority and assign your money to cover your most pressing bills first.</p><p id="13d1">By creating a budget based on your lowest anticipated income, you know that you can cover your living expenses during your worst-case scenario.</p><p id="87aa">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.</p><h1 id="265d">3. Make a ‘must’ and ‘want’ list</h1><p id="27f9">Creating a priority list of ‘must’ and ‘want’ items will help you determine what you would purchase if you ended up with more money than you predicted for the month. Your must list includes the things that your estimated income <i>has</i> to cover, such as your shelter, utilities, and food. Your want list contains items that you will only purchase if you end up making more money than you anticipated.</p><p id="d0d8">This step is very important; if you don’t plan how you will potentially spend extra money that you may receive, you are more likely to blow that money on things that you do not need. Think about things like car registration, an oil change, or an upcoming birthday gift. If you end up earning more money than you need to cover your bills for the month, are there other future expenses that you

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want to plan for?</p><h1 id="5fb2">4. Set aside an emergency fund</h1><p id="5596">If you don’t already have an emergency fund, I would suggest that the first item on your ‘want’ list should be a savings account. <a href="https://readmedium.com/how-i-saved-50k-in-two-years-e46d3e0fa8">My emergency fund has saved me</a> on more than one occasion; without it, I would have acquired thousands of dollars of debt and derailed my financial goals. An emergency fund is especially important when your income is unpredictable.</p><p id="b76b">You use your emergency fund for unexpected, urgent expenses such as a medical emergency, car maintenance, or an emergency home repair. It’s not intended to cover discretionary spending such as concert tickets, new clothes, or an upgraded electronic. Most financial gurus advise starting with a $1,000 emergency fund and building up to 3-6 months of living expenses as you acquire more substantial savings. Doing this will give you a cushion if you find yourself without work or earning far less money than you ever have in your lifetime.</p><p id="460f">Preparation is especially important when you don’t have a consistent stream of income to count on. By planning and preparing for unexpected financial emergencies, you can ensure that you stay financially successful even when your income is down.</p><h2 id="6020">Get the Mini Post-Grad Survival Guide</h2><p id="84b5">A 5-day email course with amazing tips on budgeting, investing, and productivity for 20-somethings. Learn how to spend$ 40 per week on groceries, among other things, by <a href="https://morning-darkness-5176.ck.page/75ec2d5152">signing up for free</a>.</p></article></body>

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.

3. Make a ‘must’ and ‘want’ list

Creating a priority list of ‘must’ and ‘want’ items will help you determine what you would purchase if you ended up with more money than you predicted for the month. Your must list includes the things that your estimated income has to cover, such as your shelter, utilities, and food. Your want list contains items that you will only purchase if you end up making more money than you anticipated.

This step is very important; if you don’t plan how you will potentially spend extra money that you may receive, you are more likely to blow that money on things that you do not need. Think about things like car registration, an oil change, or an upcoming birthday gift. If you end up earning more money than you need to cover your bills for the month, are there other future expenses that you want to plan for?

4. Set aside an emergency fund

If you don’t already have an emergency fund, I would suggest that the first item on your ‘want’ list should be a savings account. My emergency fund has saved me on more than one occasion; without it, I would have acquired thousands of dollars of debt and derailed my financial goals. An emergency fund is especially important when your income is unpredictable.

You use your emergency fund for unexpected, urgent expenses such as a medical emergency, car maintenance, or an emergency home repair. It’s not intended to cover discretionary spending such as concert tickets, new clothes, or an upgraded electronic. Most financial gurus advise starting with a $1,000 emergency fund and building up to 3–6 months of living expenses as you acquire more substantial savings. Doing this will give you a cushion if you find yourself without work or earning far less money than you ever have in your lifetime.

Preparation is especially important when you don’t have a consistent stream of income to count on. By planning and preparing for unexpected financial emergencies, you can ensure that you stay financially successful even when your income is down.