How to create a budget for irregular income

How to create a budget for irregular income.jpg

August 21, 2018

When it comes to putting together a budget, a common question I get asked is how to create one for someone with an irregular income. Most of us are lucky enough to know exactly what each paycheck will read before it ever hits our account; however, many others don't have that luxury. But whether your job is based on commission or projects by hire, you can still put together a successful budget. 

When it comes to irregular income, my advice is to put together a bare bones budget based on the minimum pay you know you will receive each and every month. For example: if you are in a role that is commission based, you'll put together a budget based on your guaranteed take home pay each month, excluding all commissions. So if your pay is structured to where you receive $1,000/month + commission or sales, you'll put together a monthly budget to work within $1,000.

(FYI - when I'm talking about putting together a budget, I am referring to a zero-based budget where you take your monthly income, and assign every single dollar within that income to a place. You can read more about how this works here.)

Your bare bones budget should first cover your basic "four walls." These are:

  • Shelter - this includes utilities
  • Food - this includes groceries, but not fancy restaurants
  • Transportation - this includes gas or money for public transportation 
  • BASIC clothing needs - this is really only if you have a growing family that is literally outgrowing their clothes...not to satisfy your shopping fix ;)

Prioritize these needs first as they will always need to be covered in your budget. After that, use what money is left over to pay remaining bills and take care of any other necessities. If you're paying down debt, be sure to prioritize those minimum payments in as well. 

(Psst - don't already have a budget template or tool? You can download the one I use for free here.)

Next, use your commission checks to round out the rest of your expenses. Make a list from most important to least to prioritize where this additional money will go. This might include throwing more money at your debt snowball or maybe even saving up for those shoes you've been eyeing. As you get each commission check or have money left over from a project you were hired for, go down your list and divvy out money as necessary. If you run out of money before you get to the end of your list, simply pick back up where you left off when you get another check.

It will take a little bit of trial and error to get the hang of this at first (did you know it takes the average person 90 days to get decent at budgeting, irregular income or not?), but practice will get you where you need to be. 

Irregular income or not, the key to a successful budget is simply telling every single dollar where to go. If you are an online/app kind of person, EveryDollar is a great place to start. If you're more of an excel/pen and paper kind of person, click the button below to download my handy spreadsheet that I've been using for four years. It's never let me down. ;)