How to Budget When Your Income Fluctuates

Creating a budget that actually fits your financial and lifestyle situation is no easy task. It often takes a couple of tries to find the breakdown that works for you. Factor in that you income fluctuates from month to month, and you may find that things get even more complicated.

Whether you rely on commission, work freelance, or even depend on seasonal work, there’s a variety of reasons why your income fluctuates. If you find yourself in a similar situation and have problems creating a budget, consider these four steps to setting up a budget that works for you.

1. Breakdown Your Expenses

The first step to creating any budget is breaking down all of your expenses. Be sure to start with your absolute necessities first. Anything you have to pay every month needs to come first. After which, you can add in any additional expenses or luxuries you may want. Then subtract your expenses from your current income to see exactly how much you need each month to cover those expenses.

2. Average Your Incomes

With an irregular income, you never know for sure what you’ll bring in each month. One of the best strategies you can use is to take your income numbers and average them together. You may want to do so for the last three years to gain a better insight into your net salary each year. Then subtract your monthly expenses from the average. If you find your average insufficient in covering your expenses, you may need to either find supplemental income or decide what you can cut or reduce from your budget.

3. Create Multiple Budgets

You may find that your average doesn’t accurately depict your net income. If that’s the case, it might be a good idea to create multiple budgets. Create a budget for when you have a higher income, one for in the middle of the road, and one for when your income is a little scarce. By doing so, you can be prepared for whatever financial situation you find yourself in each month.

4. Deposit into a Savings or Holdings Account

Another great route to take for a fluctuating income is to create a holdings account for yourself. Instead of automatically using whatever income you receive, you deposit all sources of income (paycheck, bonuses, gifts, and tax refunds, etc.) into an account. Upon figuring out your monthly expenses, you then withdraw an amount each month that you cannot only afford to take, but that will cover your expenses as well. The important thing to remember here is that no matter what kind of month you have, you always withdraw the same amount.

Balancing your lifestyle with a fluctuating income is far from easy. However, in a world of rising entrepreneurs and freelancers, more people have to adjust to a life where your net salary isn’t always steady. Thankfully, by following a few key strategies, you’ll find that there are ways to budget and prepare for when your income fluctuates.

Does your income fluctuate? How do you budget?


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