Inconsistent Income! How do I budget?

Budgeting on a Fluctuating Income

Imagine doing a monthly budget without knowing how much you will earn, when you will get paid, and how much you will make the following month. This is a common scenario for people who are self-employed, freelancers and contractors. The steps below will help with budget creation if you're living on an irregular and inconsistent income.

1. Create a bare-minimum budget:

This is also known as a baseline budget. It does exactly what it sounds like; it only includes essential and important expenses you need on a monthly basis and nothing else. This includes necessities like groceries, utility bills, transportation, and rent/mortgage. Also included here are savings, investments, and debt repayments.

2. Plan for future months during the months you earn:

The key to living stress-free on a fluctuating income is having ample savings and planning ahead. All your earning should automatically go into your savings account. Bad months will come along, and when they do, your savings will be there to fill in the gaps. During good months, the focus should be on building up an emergency fund. You need a cushion to protect you against income shocks.

3. Pay yourself a salary:

Once you’ve created your baseline budget, you’ll know exactly how much money you need to make it through the month without dipping into savings. So, on the first day of the following month, deposit that amount of money from your savings account into your current/checking account – and nothing else. I call this strategy, paying yourself a salary.

These steps will help you become more in control of your money. The budget won’t be picture-perfect the first time, you may forget some things or not budget enough for groceries. But don’t give up! It takes time to get into a budgeting rhythm. Keep your eyes on the prize and learn from your mistakes as you go along.

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Categories: Budgeting
Oyenike Adetoye

About Nike

Oyenike Adetoye (aka Nike) is an impactful speaker, author and personal finance expert. A Chartered Management Accountant by profession. Nike is the founder and CEO of LifTED Finance, a private financial firm that educates, coaches and supports people on their journey through financial fitness and wealth management.