How to Budget an Irregular Income

You may think that since you earn an irregular income, you’re off the hook when it comes to budgeting. No way! The truth is a budget is even more important for you than it is for people whose income and expenses are almost the same every month. If you don’t budget, that unpredictability can make it easy to get behind and make getting ahead virtually impossible!

Fortunately, budgeting an irregular income is pretty easy. Here’s how in four simple steps:

1. Start by listing all your expenses. Exact amounts and priorities don’t matter at this point. Just get them all out there. Don’t leave anything out!

2. Next, list your expenses in order of importance. No matter how much you make, begin your list with the Four Walls: food, shelter/utilities, clothing and transportation. One of the reasons you do a budget is to avoid crisis spending decisions. So, if you have food in the pantry, a roof over your head with the light bill paid, clothes on your back, and a car to drive to work tomorrow, you can face nearly any financial challenge.

3. Now ask yourself the question, If I have enough money to do only one thing this month, what would it be? Write that thing as the next item on your list. Next, ask yourself, If I have enough money to do only one more thing this month, what would it be? Write that as the next item on your list.

4. Keep going until you’ve written down everything you could spend your money on (including paying off debt, giving, saving, etc.).

Now, when you get paid, no matter when it is and no matter how much, you know exactly what to do with your money. In the case of your Four Walls, you’ll:

  • Pay your food, clothing and gas for the month.
  • Pay your rent or mortgage and your utility bills.
  • Pay your car payment.

Keep moving down your list of prioritized expenses until you’re out of money. Anything you didn’t get to with this check carries over to the next time you get paid.

If you get to the end of your list and you still have money to spend, that’s awesome! You can use it to speed up your progress on the Baby Steps. For example, if you’re on Baby Step 2, any leftover money will go toward your debt snowball.

Don’t worry if your budget doesn’t work out exactly as you planned. It takes a couple of months to get a handle on your spending and, if you’re married, how to communicate with your spouse about the budget. Just stick to it, and pretty soon you’ll see that your money goes further and does more when you have a plan for it.