How to Budget With Irregular Income

5 steps for budgeting when you have an irregular income.

Laura Adams, MBA
2-minute read

Travis, who is one of my coaching students, asks: It was easy enough to put together a monthly budget, but how do I manage it when I don't get paid the exact same amount each month or on the same day?

This is a great question because many people, especially those who are paid on commission, do freelance work, or are self-employed earn income that changes from month to month.

Budgeting can be even more challenging when you have irregular income because it's easy to overspend in the good months and get caught short in the lean ones.

The secret is to create a plan to smooth out your spending so it stays the same every month no matter if your income is up or down or when it comes in. Follow these 5 steps to budget when you have irregular income:

  1. Estimate your income: Figure out what you earned last year and divide it by 12 to come up with a monthly estimate. If last year was great and you don't believe your income will be the same this year, use a smaller percentage, like 90%. Or if you're confident that this year will be better, use a higher percentage like 110%. But my advice is to work off a conservative income estimate.
  2. Create a spending plan: Set up categories and amounts for each of your expenses, such as food, housing, insurance, and auto. Don't forget to include taxes, retirement savings, and any other financial goals you want to achieve.
  3. Deposit your income into a savings "sweep" account: Instead of having your income go directly into a checking account where you might be tempted to spend all of it, deposit it into a savings account first, like Ally's High Yield Savings.
  4. Transfer funds to your checking account: Transfer the same amount of income from your savings into your checking account once a month or every other week to cover your budgeted expenses and bills. Think of the amount you sweep into your checking as your salary.
  5. Maintain excess funds in your savings account: When you stick to your spending plan no matter if your income is up, you'll have an amount leftover in your sweep account. That's the money you'll use to pay your bills when your income is down in a future month.

Remember that the excess you accumulate in your savings sweep account should never be spent arbitrarily nor is it an emergency fund. Your sweep funds are part of your annual spending plan to make sure you can cover your bills.

If you stick to your spending plan and have an excess amount in your sweep account at the end of the year, you can use it to boost your emergency fund, pay down debt, or contribute more for your retirement.


Laura Adams is the award-winning author of Money Girl’s Smart Moves to Grow Rich. Get the paperback or ebook on Amazon.com! Click here to Download 2 Free book chapters!

About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.