How to Budget When You Have Inconsistent Income
by CashTime Loan Centers
Is your income inconsistent? Maybe you work on commission, salary and tips, or have a side gig that changes from month to month. No matter the reason your income may fluctuate, you can still create a workable budget. Just because your income is unpredictable doesn’t mean you can’t make a budget that works for you. Budgeting is especially important if you don’t know what your next paycheck will bring. Having and using a budget will show you exactly where you are on your financial path, and help you get where you want to be. Budgets give us a greater chance of financial success. We can pay off debt, develop a plan for emergencies, build up our savings, and sleep better knowing that we are in control of our money, rather than the other way around.
Where do you start to budget if you don’t know what your income will be? You could look at last month’s budget and start there, but it may be safer to look at the last six to 12 months’ worth of income and start with your lowest income month. It’s a lot easier to add money to the budget as you go along than it is to take money away.
Start by creating categories for your basic needs; food, housing, transportation, and clothing. Set each category up with the minimum needs, like weekly trips to the grocery store, your monthly rent or mortgage payment, monthly utilities and homeowners or renters insurance payments, car payments, and best guess for monthly gasoline and car maintenance expenses. If you need clothing or shoes, budget for it, but don’t budget for a shopping spree. Keep it basic. After the necessities are planned for, list the rest of your monthly costs in order of most important to least important. Don’t forget to add a savings category and a giving category. Make this budget as “bare bones” as possible; budget for the absolute least amount you can live on in each category.
Save your receipts or record your spending in a budgeting app and check your progress weekly. As you go through the month, you may find that you’re spending less than you planned in a category (good for you!) or that your income is more than you expected (again, yay!!). If you do end up making more money than you planned, simply add that into your income category, and decide where you want that money to go. You are in control – bump up your saving/ giving category, put some extra toward paying down a debt, or create a new budget category to save for a low income month – you decide what to do with that extra income. (Doesn’t that feel good?)
Expect the unexpected. It happens to all of us; sometimes an unexpected expense comes up that we haven’t budgeted for. If your income varies every month, make a “miscellaneous” category and put a little money in there every month. That way, you don’t have to pull from grocery or gas money to cover an expense you weren’t anticipating.
Have you heard of zero sum budgeting, or zero based budgeting? It’s a smart way to set up a budget that accounts for every dollar of income. The basic concept is simple; give every dollar a job to do until you reach zero dollars left over. In other words, every dollar of income goes into a category so there’s no money that isn’t designated to do a job, whether that’s pay for gas, go into savings, or live in an emergency fund or miscellaneous fund. The beauty of a zero based budget is that you know exactly what every dollar of income is supposed to be doing, and you can check weekly to make sure each buck is doing its job.
Give yourself time. If this is the first time you’ve tried living on a budget, you’ll probably not get it perfect the first time around. That’s okay, you’ll learn as you go and in about three months, you’ll have a pretty good idea of where your money goes, and where you can make adjustments to move along that path to your financial goals. Budgeting apps can help you manage the mechanics of budgeting. Choose from popular apps like Mint, Every Dollar, You Need a Budget, or Wally. There are lots of online tools to help you get this budgeting thing down.
Budgeting will help you learn to be more aware of what you’re spending your money on and motivate you to curb impulse buys that sabotage your monthly budget. Budgeting is not bondage, just the opposite; it will help you along the road to financial freedom by putting you in the driver’s seat with your money. If you find that you have more month than money and need a little help getting through the month, reach out to us here at Cash Time; we’re here to help you take care of the business of life.