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How to Budget on an Irregular Income

Guest post by Jenae at I Can Teach My Child.

As a family of four, we live on my husband’s income only. He is currently an Administrator in Long-Term Care, a job he absolutely loves. I consider his job a ministry to the elderly and he truly has a gift for encouraging this neglected population.

His income, however, is largely bonus-based and therefore is quite irregular depending on the center’s performance in meeting budget, accounts receivable, census, etc. My husband is a high-achiever and does great with this type of compensation, but it certainly makes budgeting quite tricky!

Here are just a few suggestions we have found helpful for budgeting on an irregular income:

1. Look to the past.

Look back to the last few years and make note of overall compensation received as well as any noticeable trends (for example, a large part of my husband’s bonuses pay out in March). Divide your average income by 12 to see what you can expect your monthly income to be.

2. Make a budget.

Once you have your average yearly income, make a budget based on that income and set your financial goals (i.e. paying off debt, mortgage, etc). If you are new to an irregular income, you’ll want to shave off as much excess spending as possible until you are comfortable with the new income situation.

3. Keep a cushion.

In addition to 3-6 months of an emergency fund in an accessible savings account, I would recommend having at least one extra month’s worth of expenses in your checking account. This will help tremendously during those lean months without having to dip into your emergency fund.

4. Watch closely.

Make sure you keep a close eye on all financial transactions to ensure you have enough money to pay your monthly bills (as well as to make sure you’re not overspending). Using cash is always the most reliable way to do this, but we also use for our electronic transactions.

5. Discuss and Evaluate.

Every month, look over your budget and actual spending (with your spouse, if you are married). If you have received a large payout, decide what to do with that money (put it towards the mortgage, paying off debt, etc). If this month is especially lean, look for ways in which you can cut back. Monthly budget meetings are especially important for families with irregular income.

An irregular income can be especially challenging in regards to managing and budgeting money. But it doesn’t have to be stressful nor consuming. Keep an open line of communication with your family members and remember to always keep a cushion to carry you through.

Jenae is a Master-degree holding former first grade teacher turned stay-at-home Momma. She loves finding creative ways to save money, spending time with her family, and sharing fun activities on her website I Can Teach My Child.

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  • Katie says:

    thank you for this post. as a small business owner, my income varies depending on the “busy” times of the year and it continues to be a frustrating part of our budget. thankfully, i have a husband with a full time income, which we have lived off of for the last 2 yrs. We use my income to pay down debt. still frustrating, but managable with the coupon usage. haven’t used a credit card in 3 years and it is liberating!

  • Grace says:

    My husband is self employeed and we live on his income only. I clean vacation rentals and my income goes to adding to our cushion, saving for special items, and paying off our mortgage. I sometimes hate being on an irregular income since all our money comes in the summer months and then only is a trickle in the winter. I cringe to think of how much money we wasted in the past. We could have had our house paid for! But, we are keeping our eyes looking forward and appling what we have learned.

    • Belinda says:

      Grace – “been there, done that”!! I’ve been married for 31 years, we’ve been self-employed for 24 and to say that I’ve mis-managed what my husband has entrusted to me might just be an under-statement. BUT, God is gracious to forgive us when we confess our wastage and repent of it. We can ONLY go forward and live out what we have learnt – He will honour your desire to do better, don’t beat yourself up over the past, it’s a waste of time and emotional energy. In Him, Belinda

  • I think it is so important to always be aware of spending because everything can add up so quick. I think these tips are very useful even with a family (such as ours) who has two steady incomes because you just never know when a crisis could happen or if life takes you in a different directions. Thank you for sharing.

  • Rachel says:

    I appreciated this post as well! My husband is a farmer, so we often have large expenses and don’t always know when we’ll be getting more money. I don’t know quite how to budget with the way we live, but I’ve really enjoyed learning to be more frugal with what we do have! 🙂

  • Our situation is a little bit different, in that our income fluctuates somewhat from month to month (my husband is on an hourly rate as a computer programming contractor), but not hugely as yours seems to do. What we’ve found to work is that we spend a month “behind” what we earn. For instance, the money we have budgeted for May was the income from the end of April and Mid-March paychecks.

    • MomofTwoPreciousGirls says:

      What did you do to get ahead by a month?

      • We actually were living off our emergency fund for awhile (while we worked on our family business). When my husband had a regular job again, we just waited an extra month before we started a budget based on the new job and began repaying our emergency fund. I hope that makes sense!

  • TeamBonk says:

    Very timely post! My husband is venturing out to be self employed this coming July (I’ll be working part-time, 3 days a week). Unfortunately, my income alone doesn’t cover all of our expenses so it will be tricky for us as well.

    The tips above are very helpful … and learning all these savings tips will certainly come in handy!

  • This was a great post! We have a variable income – my husband’s job is a base + commission structure, and I teach private music lessons. We have been so frustrated at times trying to stay within our budget because on the lean months, there is only so much we can cut! Planning ahead for the lean months has been huge. There are just times that we will have to dip into savings, but somehow planning for that makes it less painful.

    On the flip side, we have really seen God provide through our variable income. Last year, our youngest son had an expensive medical procedure, and our part after insurance was $600. We were able to go to that procedure with cash to pay for it all out of that month’s income. The needs of the month often match the income, by God’s grace!

  • Elizabeth says:

    We too have a variable income. I use to help look back and plan ahead. We put everything on our credit cards (we pay them off each month, of course) so it helps me keep track of when I’m getting close to my budgeted amount each month. You can also designate savings goals for when those extra $$ come in. It’s great!

  • peever says:

    My husband is self-employed and we live off of his income only. He has standard pay rates and days, but if his clients don’t pay when they’re supposed to, we’re the last ones to eat, so to speak. So it can get tricky. His work depends on the weather so that’s tough as well. We had a really wet summer last year and he couldn’t take a pay check for 3 months. Thankfully we had 6 months worth of expenses saved, but we’re still working on replenishing our savings.

    I have a hard time budgeting with irregular income. We just live as frugally as we can and hope for the best and thankfully God has always come through for us when we needed it. I’m trying to find work doing data entry from home now to help supplement our income. We have enough for our expenses, but we have been unable to save any extra for things like home improvements, vehicle upgrades, etc.

  • olivia says:

    Great article! I work for a school district, along with my husband, so summer is always a pain. I hope to work out a budget this time so it won’t hurt so bad this year.

    • Casey says:

      I too work for a school district (and I’m not paid in summer months.) So I literally save up all school year just to cover my summer expenses! This summer I was successful in finding a part time job which will allow me to help pay back my student loan faster. I hate this cycle though. Save all year for the following summer. How can I get ahead?

      • olivia says:

        I drive school bus and I also have enough seniority to get work over the summer, eg. summer school, field trips, etc. This is the time of year I look for financial help through the county. I apply for food stamps and such since its the only time of year we qualify based on our income. it definately takes some pressure off of us. a local food shelf also has a summer food program so we can get food for the kids throughout the summer months. Again, a big help with four kids! check out the resources in your area. You may be surprised what you find! Good luck!

  • darryl says:

    I just started using YNAB (you need a budget). So far i love it.

  • MomofTwoPreciousGirls says:

    I wonder how to budget with a mix of steady and irregular income. After reading TMM, the Irregular Income budget did not fit us, but the normal budget isn’t quite right either.

    Dh and both get paid bi-weekly, but opposite weeks, so there is a paycheck every week (that is nice!). We both then also get a bonus in our second pay of the month. His is completely unpredictable, since it’s based on how well the business does and mine is based on the monthly production of the two people I assist (starting this month we are going from getting flat dollar amount to a percentage based amount, so now I can REALLY fluctuate too).

    MY way of dealing was to figure out our minimum base, mine based on a 40 hr workweek and his 50, since that is the minimum number of hours we work and then do our all percentages/dollars/envelopes based on that. Then when we get our bonuses and right now all that is going toward our 3 months of e-fund. We also keep a little extra fun money from those checks too.

    Anyone else have suggestions?

    • Megan B says:

      I am in the same boat. My income is regular but my DH is not, as he works retail and is in college full-time. We’ve tried estimating by totaling his hours and working out the pay but that can get you in trouble too. I use Mint to keep track of things, but right now its hard to plan more than 2 weeks in advance. Thankfully we are building our emergency fund, but it’s going very slooooow.

  • Rita says:

    Thank you for this post. My husband has a commission only based job which is tied to the housing industry. To say these past few years have been challenging is an understatement! I have a full time job outside the home which basically provides for the majority of our budget.

    I’m struggling with being the “bread winner”, being a mom, spouse, and all the other things on my plate. Does anyone else get discouraged in these circumstances? I’m feeling a bit more stressed just watching every penny. God has provided graciously for our needs, but I also feel like I need a break!

  • No Debt MBA says:

    A big savings cushion and aggressively saving in big income months was really key for me when I switched to an irregular income. I’d recommend budgeting really conservatively until you have the swing of things and a cushion built up. With a year’s worth of living expenses in the bank in case something went wrong I never had to stress about my fluctuating income, just keep my eye on the big picture.

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