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5 Tips for Achieving Financial Freedom on an Irregular Income

Guest post from Angie of Live Healthy Save More

Choosing to live debt-free is a challenging task for anyone, but it is especially difficult for anyone dealing with an irregular income. In today’s changing economy, more and more people are adopting freelance, self-employed, and contract-style careers.

Sticking to a budget, paying off debt, and saving can be incredibly difficult when your income varies from month to month. Long term planning can also be very challenging when there is no way to predict how much money will be coming in.

My husband and I have been in this situation for the last two and a half years. He is a freelance violinist. I am a doctoral student, freelance administrative assistant, and blogger.

We went through Financial Peace University our first year of marriage, and it changed our lives. However, many times we had to adapt Dave’s suggestions to fit our “non-traditional” lifestyle. Although it has not been without set-backs, we have learned a lot about how to plan and budget with a irregular income.

Here are five simple tips you can use to harness the power of your variable income to achieve your goals:

1. Build a larger emergency fund.

Freelance or contract income is often incredibly unpredictable. Gigs or contracts fall through, or customers delay payment.

In light of this unpredictability, I highly recommend building at least a three-month emergency fund before putting any extra money toward paying off debt. This will give you a large cushion to rely on in case you have a slow month or a job unexpectedly falls through.

We learned this one the hard way. When we only had a small emergency fund, we often found ourselves on the ever-revolving cycle of having to put essentials on the credit card while waiting on a payment from a previous job.

2. Budget a month in advance.

Another way to prevent the credit card cycle and to avoid frequently draining your savings is to budget a month ahead. For example, everything we make in February goes towards paying the bills in March. February’s bills have already been covered by January’s income.

Being a month ahead gives you the flexibility to have a whole month to prepare if gigs or contracts dry up. It also allows you to wisely allocate unexpected extra income.

If you know next month’s bills are covered, you can put this extra income towards savings or debt payment. If you are receiving a tax-refund, you could use it to jump start your month ahead budgeting.

3. Know your seasons and stockpile accordingly.

Living with a “non-traditional” income often comes with seasons of feast and famine. It is important to plan for these seasons as much as possible. For example, I know that we have less income in the summer.

This means that during our busy season (February through May) I intentionally look for extra deals and sales. If spinach is on sale for 99 cents, I may buy two bags and freeze one for later use. I take extra time to coupon and add to our toiletries stockpile. I also garden in the summer to reduce our grocery bill.

4. Get organized.

This is a huge key to success on a variable income. Know when your big non-monthly bills are due and save monthly whenever possible. We use automatic savings bank drafts to ensure we will have the cash for our yearly instrument and rental insurance payments.

Also, keep track of all income. We use a modified version of this spreadsheet. This will help with long-term planning.

This spreadsheet can also help with tax planning. You can also use this to track receipts and possible deductions. I am not a tax expert, so I will not attempt to offer tax advice. However, I will say that it is imperative to keep track of your income and to have a plan for tax payments. We also learned this one the hard way!

5. Stay in your day.

Although planning ahead is vital to financial success, everything must be done in moderation. Planning can quickly turn to obsessing, especially when there are unpredictable months ahead. I limit the amount of time each day that I spend working on our finances in order to prevent excessive worry.

A friend, who has recently overcome a major life obstacle, shared with me her secret to success. Her motto is, “Stay in your day”. Plan wisely, but do not allow your planning to pull you from living well in the present.

Worry never robs tomorrow of its sorrow, it only saps today of its joy.”
~Leo Buscaglia

Do you have irregular income? What are your tips for sticking with a budget? I’d love to hear!

Angie is a doctoral student and online writer. Outside of her academic pursuits, she loves creating useful and innovative online content about healthy living. She also enjoys spending time with her amazing husband. Her other favorite things include chocolate, sports, and sunny days. She blogs at Live Healthy Save More.

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  1. Tammy says

    My biggest financial advice is to get a month at a glance calendar. We did this 6yrs ago and this system works the best for us. We put all of our bills on the calendar on the day they are due. We put all the auto drafts; monthly bank fees; kids lunch accounts; etc. All the money that goes out the door.

    This way when you have that bigger paycheck you can see at a glance what needs to be paid first. On the weeks that you have the smaller paychecks you can see at a glance where the money needs to go and make sound financial decisions if you need to push a bill back.

    Keeps us from forgetting to pay something or thinking that the other person was going to pay a particular bill and it gets overlooked.

      • Diane says

        I also use a month-at-a glance calendar and post the bills on the due dates. I also try to pay next month’s bills using this month’s income, trying to stay a month ahead at all times. When I can, I pay bills whenever I receive them instead of waiting until the due date. Out of sight, paid..don’t have to think about finding the money whenever the bill comes due. If I’ve spent the money on paying a bill, I don’t have the allure of spending it on something else before the bill comes due. Any excess income (sometimes there’s not much, or occasionally zero!) goes into our on-line savings account. Last month we had a $511 furnace repair bill and I was so thankful that our savings account was there to pay the bill instead of charging it. I budget for birthdays, holidays, vacations and the money for that goes into the savings account each month until it’s needed. I am driven to pay ourselves first by putting $50 per week into the savings account. If the bill payments don’t leave enough to do that, I rob our food budget to send to savings and we eat more from our stockpile and the freezer that week. Still good, nourishing food – maybe just not the extravagance of extra snacks, desserts, etc. that the food budget might allow from time to time. There is such peace of mind knowing that barring some really, really big emergency, we have enough to weather a few lean months. I can see how folks who have regular income would benefit from the suggestions you named above…just good advice all the way around. Thanks much.

  2. says

    These are excellent suggestions. My husband has a traditional job, but I’m blogger and we rely pretty heavily on my income to help cover all the boys. Needless to say, the blog income streams don’t exactly come in as regularly as a weekly paycheck. When I’m getting paid at all these odd times throughout the month, it makes it pretty difficult to budget since I’m never quite sure what day certain payments will come in.

    Over time, I’ve come to realize that having a back-up fund (or emergency fund) is crucial when you’re depending on income like mine. If a payment comes in later than expected and not in enough time to cover a bill on the due date, you can easily just fall back on your emergency fund to cover that bill so it’s not late and then replace the money as soon as you get it.

    • says

      Anna, thanks for sharing. It is nice to know that we are not alone in struggling at times to manage irregular income :) The larger emergency fund has also been our plan to help with this challenge.

  3. says

    I actually look at the budget 3 months in advance, knowing that summer brings us larger utility bills, for example. I do plan the month’s money like you do, though not all months allow us to have the money ahead of time.

    Bills are paid first. Food, clothing, and anything else comes after bills are paid. This means if there isn’t enough for food, I don’t buy food that month, but eat from my pantry instead. Having a garden helps me to have fresh food even when I cannot go to the store.

    Like you, I have paid off debts after those other bills will be paid for the next month.

    We have always had an irregular income, and I definitely agree about having a larger amount set aside in savings!

  4. peever says

    All good advice. My husband is self-employed and I’m a stay-at-home mom. We’ve had some rough times in this economy. He’s always swamped at work, but no one is paying him, which is really frustrating. It seems like a lot of his week is spent making collection calls and having meetings to demand payments.

    I’d actually recommend having at least 6 months worth of income in savings if at all possible, especially if both you and your spouses’ incomes are irregular. We started off with that, but there’s been times where we’ve gone months without being able to take a paycheck so we’ve used every cent of it. Starting off with that large of an emergency fund is the only thing that has gotten us through these past few years without debt.

    I also have a much larger stockpile than someone with a traditional income might have. If the price is right on something with a long expiration date, I will buy as much as a year’s worth if I’m able. For instance, this time of the year is the only time I’m able to get really good deals on dishwasher detergent. I always buy a year’s worth every February. Sure I feel a little silly buying a cart full of dishwasher tablets, but I save a lot of money doing that. I do that for everything. I try to make sure my kids have a year’s worth of clothing and shoes at all times too, just in case the income is not there to buy anything. I’m able to find most things really cheap by always shopping clearance racks with coupons or buying at thrift sales and I have yet to guess wrong on sizes.

    • Stephanie says

      I thought I was the only one to do that! I am chronically ill and my husband doesn’t know where he will be working past the end of June so I have been getting the girls clothing and shoes as I find them (I have been doing a clothing stockpile since they were born but they keep growing :) since this summer/fall there may be no money for clothes- he asked why I bought summer clothes and a winter coat in February… I told him how much I spent and he was quite happy. Our kids are 23 months apart and if I miss with the older one the younger one has always been able use the item so nothing wasted so far. I have also been stockpiling paper goods like toilet paper.
      We had a nine month emergency fund that was eaten by medical expenses/short term unemployment/COBRA at the same time and we are slowly rebuilding it- without it, we would have lost our house.

  5. Allison says

    Thank you so much for this post today. I have needed some inspiration and this is exactly what I needed to hear! After my husband and I got married two years ago, he suffered a job loss. We were debt free, but had little to no savings. The credit card debt quickly ran back up, then we were granted full custody of his daughter basically over night. She came to us with the clothes on her back and nothing else. So, that was another credit card being pulled out to get her a wardrobe, school supplies, etc. We now had another mouth to feed and new added expenses. All of this while him being out of work and us living off my smaller income.

    He started his own business last spring, but it’s irregular income with little to no work in the winter months. We have weathered our first winter by the grace of God and amazing family, but the first year was rough. In any business start up, its a big expense at first. It left us with no extra cash to start paying down debt and put back savings.

    We have been struggling so much lately. We need an emergency fund and be on a budget. We feel like we are on a sinking ship when my paycheck alone is barely enough to cover bills, nothing more. This post had helped me with a plan and show me there is a starting place. I know it’s going to take a while to get us where we need to be, but this have me the hope!

    Thank you!

    • says

      Allison, I am so glad this post was an encouragement to you! It sounds like you have faced a lot challenging circumstances. I am so impressed with you determination and desire to get back on solid financial footing. Just the awareness of needing a budget/savings is a huge first step. It may not happen over night, but one dollar at time it can happen. I will be praying for you, and thank you so much for sharing your story!

  6. says

    Here are some things I have done or would do:

    * No Spend Month ( Only pay & buy for things that are a MUST not a WANT)

    * SELL Instead of Spending ( Go through your ENTIRE house and see what you can sell to bring in some cash, I have had yardsales with no furniture or any “high priced” items and still made well over $100.

    * Live well below your means ( It’s easy to freely spend when the money is flowing faster than usual, but overspending in areas will make it tight & often unbearable when the money runs dry. Try only using 1/2 to 3/4 of your income and put away the rest in an account without a debit card, checks, etc. That really is you REALLY need the money you have to go to the bank to get it out.

    Hope these help and everyone has a great day!

  7. denise says

    We do what she suggested in #2 here! I work part-time (variable income) and my husband works 2 full-time jobs (BOTH with variable income) and while we’ve never had enough to pay our bills we hardly ever have enough to put much extra on credit cards :( But at least I know I’m not adding to the credit cards with essentials like groceries.

    If you are reading this PLEASE pray for my husband. One of his jobs has turned into a dead-end job and he has an informal interview Thursday at 5 EST to hopefully get into something that both pays better and has room for advancement.

    We would also appreciate your prayers that my job could turn into what my company calls High-Time (I would be guaranteed 30 hours a week and right now I’m not guaranteed anything. Some weeks I only get 12).

    Thanks everyone. I love this blog.

  8. Lesle says

    Thank you so much for this post. Our family has been doing and adapting Dave Ramsey’s FPU as well and we fully believe in it but fall short every year because of our seasonal times of famine with our irregular income. I can already tell your post is going to help us tremendously this year. Thank you.

    • says

      Lesle- so glad you found these ideas helpful! FPU is hard and know you are not alone is struggling to apply it :) Hope these tips encourage you on financial journey.

  9. Kate says

    Hi! This post is perfect for me. my husband is a freelance musician and we live on the irregular income. I have. About a 3 month emergency fund and when we can we live on last Months income and save what we make this month. That is my favorite way to budget because then you know exactly what you have. We have also become non consumers and make a lot of stuff at home ( cleaners, personal care products, food stuffs etc.) it always helps to spend less.

  10. Meg says

    What a helpful post. A lot of financial advice starts with the assumption that you have an income you can rely on and it can be hard to relate it to your situation when you work for tips or seasonally.

    For my budget I look heavily at the Feast times as my best opportunity to save for the rest of the year. In the past I’ve worked to save 75% of my anticipated bills for the entire year in those 3 or 4 months of good employment. I’ll work extra hours, skimp on groceries or do whatever it takes to make those goals. Then during famine times I’m able to relax a bit more (because I only need to make the remaining 25%) and when I’m able to find extra work I can take the “windfall” of unexpected extra money and put it towards major goals.

    While this plan means I’m not putting a set amount of money towards retirement or savings monthly it still keeps up the level of discipline and helps me to take advantage of money as it comes and keep me saving annually rather than monthly.

    Plus, I find it easier on me to be stressed during feast times than famine times.

    • says

      Thanks for the encouragement and sharing your experience! I also don’t seem to mind working harder during the feast times if I know it will bring some security during the famine times.

  11. says

    Great article with some excellent tip here . As a 10 year veteran earning 90% of my family’s income form my online activates I can say that the best tip in this article is to build a big emergency fund. When I started out I spent most of what I earned until I had my fist bad year where I almost had to go back to the corporate world. After that I built an emergency fund that would see me through for 6 months. Now I have 12 month but I use some of that to travel for 2 months each year.

    • says

      Thanks for the encouragement! I was probably most nervous about the emergency fund tip because I know it wavers from some traditional ways of thinking. However it has been the only way we could find to make it work, so it is nice to know we are not alone in that :)

      • Angie D says

        We felt like such rebels putting aside our emergency fund before paying our debt down so it’s great to read this! It is feast or famine for us too and often hard to budget (esp with cash bc we don’t always know when we get paid next) but living a month ahead and stockpiling when you can is crucial. Thanks for your post!

        • says

          Angie- We totally felt/feel that way too :) It is nice to know there are others like us :) We also struggle with using cash, but it usually does work for us when we are a month ahead.

  12. Penelope'sMom says

    I am an attorney who works on a part time hourly basis…My hourly rate is pretty decent but I can literally miss a week of work due to a sick child or too many “mommy obligations” LOL. My husband and I prepay everyhing we can when we have a decent amount of money coming in… like the auto insurance is all paid up front, the kids school tuitions in a lump sum, if we do use our credit cards in an emergency we zero them out as soon as the funds are availiable. Many time we get a discoun for paying all of it too.

  13. Tiffany says

    Posted this to FB, but figured I would post here too.
    Absolutely Possible! My husband works a rotating swing shift, therefore his paychecks are never close to being the same. What we did is figure out what the minimal amount he brings home would be and use that as our budget, anything over that amount is used towards your next “step” or goal financially. This actually really worked to our advantage when paying off our debt and our other steps following Dave Ramsey’s Plan. Look ahead and budget for everything you need, if you pay insurance every 6 months, then put so much back each month for insurance, etc!

  14. Liz says

    Thanks for the post! But, how do you get started? My husband gets paid $8.50 an hour works 24hrs one week, 36hr the next and rarely gets a 40hr week. Plus, he commutes 20min there and 20min. back. We also have a small amount from his paycheck go into a savings account. But, we had to break into that to pay bills this past week. And, his upcoming paycheck will be enough to pay rent. So….how do you begin to budget and save on practically nothing!? We know the Lord provides us with just what we need, but we would also LOVE to incorporate budgeting and saving.

    • says

      Liz, this is such a tough question, and I know it can be really hard when there is barely enough to cover bills. Just reading blogs like this is a great place to start. Crystal and her team have so many great ideas.

      What helped me when I started learning to budget was to actually find out how much I was spending. You can do this by writing down all your expenses for the month, or using a site like mint.com to help you track it. Once you know where its all going you can see if there is anything you can adjust. I realized we spent more that we though on eating out/coffee shops/vending machines (even if it was just a couple of times a week). We have started going to these places less or using coupons for restaurants/fast-food/coffee shops to cut this a big. Knowing where everything was going also helped me to set a realistic minimum budget.

      Some of the other commentators have made great suggestions also, like selling things through Craigslist or online, couponing, eating from the pantry. If you happen to be getting a tax refund, you could also use that to jump-start your savings or use it to add to a food/toiletries stockpile to get you through some of weeks when money is short.

      I would add using sites like Swagbucks.com, mypoints, and other survey/online reward companies to add to your income. It may only be $5 or $10 dollars a month, but every little bit helps. When things got really tough for us I used MTurk.com to make a little extra cash. I usually only made like $2 or $3 an hour, but it did help us get through a lean time.

      I hope some of these ideas are helpful. Thanks for sharing your story, and I am impressed by both your faith and desire to be a good steward. If you ever want to talk more feel free to email me.

      • nichole says

        I am so frustrated latley. I started a job in September with the promise of 36 hours a weej, which was perfect for us. Not to long after, my van started having problems so we took on a car payment. My paycheck alone should have been enough to cover it with $1,000 over a month for savings, sports for the kids, etc. We should be doing great. But my job has been so unpredictable latley, I have been cut almost every month. And havnt gotten a normal paycheck since before Christmas. Basically, my paychecks hanless a month than they should be. Now, I manough to pay my car payment. Since I don’t work June-mid august ‘we were cut two weeks early here as well’, I wanted to pay extra on my car payment so I didn’t have to find a Part time job(I have kids) and this is a career, I simply cannot now and am so worried about this summer.

        • says

          Nichole, I am so sorry to hear about your job difficulties. I will say a prayer for you as you walk through this difficult season. Know that you are not alone in struggling with fear and frustration in this area.

  15. says

    I’m a Realtor and my income, all commission, is ALWAYS irregular! I work in New Hampshire and winter is the slowest season, so I try to budget ahead with that in mind.

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