Budgeting with irregular income

By Matt Mayerle
Modified on January 29, 2024
budgeting with irregulat income

How did it happen again? It’s the 20th of the month, and there’s less than $100 in the bank. You have a few shifts scheduled for next week, but your paycheck won’t come until the first day of next month. But you budgeted! You even stuck to your spending goal, but there’s still not enough money. So what went wrong? Well, budgeting with irregular income is not easy, but it is possible.

Well, every budget has two components: money out (spending) and money in (income). Even if you stick to your “money-out” target, you might still run out of funds if your budgeted “money-in” was wrong or insufficient. 

Hourly jobs can make it challenging to budget at times. Sometimes you won’t know how many shifts you’ll work in a month or how much you’ll earn during those shifts. Is it just impossible to budget with irregular income? Well, it’s not impossible, but it is more difficult to build an accurate budget when you can’t reliably predict your income. 

That’s why CreditNinja is here with helpful tips you need for building a useful budget when your income varies month-to-month!

Build a Low-income, Low-spend Budget

Ok, the first step is to write down the lowest amount of money you might earn in a month. We’ll call this amount your “income floor.”

But how do you estimate your income floor? Look back at the paychecks you’ve earned at your current pay rate. The lowest amount you’ve brought home in a month at that rate is a good starting point for estimating your income floor. 

It’s important to consider what led that month’s earnings to be lower than other months. Did you get sick and have to miss a week? Did you take an unpaid vacation? If something happened that kept you from working, you can adjust your income floor upward. The goal is to estimate the lowest amount you would bring home when budgeting for a “normal month.” 

Using your income floor estimate, you can build a low-income, low-spend budget. If you’re a first time budgeter or would simply like a refresher, check out our budgeting tips for beginners.

If you wind up bringing home your income-floor amount, there probably won’t be much room in your budget for entertainment or other unnecessary purchases. Unfortunately, you’ll have to cut those items from your low-income, low-spend budget. Take a spin through our article on wants vs needs for pointers on deciding what’s essential and what can be cut.

It’s possible that your budget won’t end up exactly like you want it. No need to stress! Now is the time to think through how you would cover the gap between your income floor and spending needs. Do you have family or friends you could borrow money instantly from? Is there another income source you could tap?

If bringing home your income floor means you’ll have a budget gap, it’s an especially good idea to set aside funds in the months you bring home more income, so that you can bridge that gap in future months. 

Budgeting with a low income or irregular income is possible, but it will take a little hard work. 

Build a Typical-income Budget

In most months you’ll bring home more than your income floor. Don’t just budget for the worst! Take another look at the pay you’ve taken home at your current rate. This time around, we’re looking for a good estimate of your typical income.

Typical income is a bit trickier to find than your income floor. It will be somewhere in-between your highest earning month and your lowest earning month. But where exactly will it fall? Is there a small range of amounts you see coming up again and again? If so, that’s a good place to start.

If you’re struggling to narrow it down to a typical income, you can calculate your average monthly income over the past 12 months and use that average monthly income as your typical income.

Two Budgets?! What Next?

Now you have two budgets. How should you use them? At the beginning of the month, it’s tough to tell how much you’ll be bringing home, so it’s smart to stick to your low-income, low-spend budget. After a week or two you should have a better feel for what your total income will look like for the month. At that point, you can consider shifting gears and using your typical-income budget.

After using both a low-income/low-spend budget and a typical-income budget, you can decide which budget works best for you. With flexibility you can make your budgets work for you. Don’t let irregular income be a hurdle to financial wellness!
For more information on personal finance tips, budgeting, and loans for people with bad credit, check out the rest of the CreditNinja Dojo!

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