3 Ways to Budget an Inconsistent Income

Managing your money is already confusing for most people. But what do you do when your income varies from month to month? How do you budget an inconsistent income?

For entrepreneurs, creatives, sales teams and anyone who works on commission this has been an ongoing question and is part of the reason so many have given up on their finances altogether.

And what we don’t talk about is that many of us aren’t looking at our finances because we’re not hitting our financial goals.

There’s guilt, shame, and imposter syndrome that stem from our inability to manage our personal and business finances.

And here’s the thing… that doesn’t just automatically shift when our business finally takes off.

We keep that same negative energy that perpetuates those same negative financial cycles.

So don’t fall for the okie doke thinking that:

One day when you have more money…

One day when you have more time…

Or one day when your life isn’t so crazy…

You’ll finally get it together.

No!

That’s not how this works. 

If you want to call forth the wealth and abundance that is due to you, you have to be a good steward of what you have now!!

Because if you can’t be trusted little, please tell me how you are going to get more?

No seriously. Tell me.

Just teasing. In this article I’m going to teach you how to budget an inconsistent income with 3 of my favorite strategies.

How to Budget an Inconsistent Income

Rule 1: Budget Your Finances Weekly

When your finances are less consistent, they require more attention.

You really can’t get around this. Less attention is a sure recipe for chaos and disaster. Trust me! 

This means that you need to make a practice of paying attention to your finances every single week 

I usually look at my finances on Monday, but you can also do it over the weekend. 

The idea is to carve out 30 minutes and take a look at how much money came in (from your business or your job) and how much was allocated towards bills, expenses, and other things. 

If your income is coming from your business, this requires an extra layer. 

You need to figure out how much of your business income you’re contributing towards your salary vs. how much you’re contributed to your business? 

Once you figure that out, you can allocate that into business and personal sub categories accordingly. 

For example, the $2500 that was allocated towards your salary might go towards rent, groceries, etc; while the $2500 allocated towards your business could be used for office supplies and marketing. 

Rule 2: Budget Based on Historical and Current Trends

When you’re planning your budget for the next 3-6 months, look at how your finances performed in the past, while also considering your current performance.

For Example, if I were going to plan out my budget for Q3, I would first look to see how I performed in July, August, and September of last year to see what I can expect based on history.

And if you’ve been in business for several years, try going back to Q3 of 2017-2019. I like having 3 data points to get a good feel for what I can expect.

But here’s the thing. Your current performance may be trending differently from your historical indicators.

Perhaps you have more or less items. Maybe your average pricepoint went up or down. And there could even be a national event (I don’t know. Maybe something like a Global Pandemic!) that is causing your current trend to be higher or lower.

After accounting for history, trend, and other relevant factors make an educated projection on what you can expect for the upcoming quarter.

Rule 3: Set Personal Performance Minimums For Your Budget

When your income is not steady, it can be hard to automate your finances because you don’t know how much money is coming in.

This is why I recommend working to a realistic minimum, and then setting up an income allocation plan for anything you make over that.

For example, if you typically make $4,000 to $7,000 per month but you hardly ever make less than $4,000, you can set that as your income minimum.

Or, if you want to push yourself, up the ante and set it a little higher.

Allocate the $4,000 according to your financial goals (read our budgeting article to learn how). And then create your income allocation plan for months where you make more than that.

That might look like:

10% to Emergency Fund
30% toward Travel
60% toward high interest debt

Or, whatever productive financial goals are important to you.

While managing your finances with an irregular paycheck may be a bit more daunting and involved, it can also be a lot of fun.

It requires a level of thought and intimacy that everyday budgets simply don’t require.

And that intimacy, when leveraged correctly, will yield results. 

Hopefully, these strategies will empower you to take control of finances as you better understand how to budget an inconsistent income. 

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