Budgeting with an Irregular Income
It’s common to have irregular income when you’re self-employed. (Unless you’re paying yourself a regular salary, which can happen, depending on the type of business you have.) This is especially common when you’re first starting out. Of course, there are other reasons for having an irregular income too, such as being on commission.
The difference between your income from month to month can be pretty dramatic. For example, one month you might make $500, and another month you might make $9,000. Or you might make nothing for quite some time, and then a little bit, and then a thousand dollars a month for a while. Who knows. That’s what makes it irregular.
The emotional impact
Dealing with an irregular income is just too stressful for some people. Whether or not you’re comfortable with it is going to depend a lot on your personality and your tolerance for uncertainty. My husband, for example, hates the idea of irregular income.
Me, I just hate the $500 months. (Now if there were a whole bunch of $500 months in a row with my business as established as it is, I’d be very worried and busy trying to fix things, but that’s a different matter.)
Budgeting on an irregular income
Surprisingly though, budgeting on an irregular income is not really that different than budgeting on a regular income.
That’s because in both cases, you’ve got a baseline of expenses that you need to meet. So you meet those, and then the rest becomes (first) savings for the lean months and (second) gravy. You probably do the same thing with a regular paycheck without realizing it — making sure you have enough set aside for your bare-minimum expenses, and then deciding how to use the rest.
I deal with an irregular income by taking the expression “make hay while the sun shines” to heart. When it’s good, I get out there and make as much of it as I can. And then I store much of it up for later via an emergency fund and a variety of other earmarked funds.
Of course, I spend some too. It’s not all work and no play. But it does require long-term thinking and preparation for the future.