We’re fortunate to earn money when you click on links to products or services we already know and love. This helps support the blog and allows us to continue to release free content. Read our full disclosure here.

Does this sound familiar?

I can’t make a realistic budget because I don’t know how much I’ll make in any given month! I can’t make a plan because my income is too unpredictable.

Whether you’re hourly, working odd jobs, freelancing, or working on rollercoaster commissions – you can make a budget that works.

Most budgeting systems fail to address variable incomes, which is silly since that rules out a huge portion of the workforce.

Most people, in fact.

It’s not just you…
10% of workers are contractors, meaning they’re brought on for a fixed period of time. They may have income for one month, or six months. They may have one client, or seven.
58.3% of workers are hourly, with 542,000 hourly workers earning the federal minimum wage.

Even if it’s a little trickier, budgeting is even more important on an irregular income. If you’re not paying attention to how your money is coming and going, you might find yourself in a tight situation without any savings to fall back on. Yikes!

Luckily, Vermillion can help.

The zero-sum, envelope-based budgeting system that Vermillion uses is perfectly suited for people with variable incomes.

Budgeting with a variable income is as easy as 1-2-3.

1. Estimate your skeleton budget. 💀

The first step is to set up your skeleton budget - the bare minimum you need to scrape by. Think of non-negotiable expenses - like rent, internet, basic groceries, etc.

To make things easier, think of a particularly low-income month you’ve had recently. If you know generally how low your paychecks can get, estimate a low-income month by pretending you’ve had two of those paychecks.

Build your skeleton budget to fit your low-income month. You may need to slash your spending to make things work, but that’s okay! This is about finding a sustainable spending plan.

This won’t be every month. Just the verrrrry slow ones.

Consider some money-saving options:

  • Can you make meals from food in your pantry?
  • Can you carpool to work to save on gas?
  • Can you entertain for free, rather than going out?

Once you have a budget you think you can stick to in tough times, print it out for reference later.

Really, I mean it. Print that thing out. On real paper. Or at least save a screenshot.

2. Fund your budget with every paycheck.

Now the fun part.

When you get paid each month, fund your skeleton budget categories first. These are the bare bones (hah!) of your budget.

The idea is to cover the essentials in your budget first. If you can’t fund everything right away, that’s okay. Prioritize what expenses are most important, or which ones are coming up before you’ll get paid again.

If you can cover everything comfortably with money leftover, move on to Step #3.

3. Establish a “Buffer” category to help during slow months.

If you have money leftover after funding all of your month-to-month needs, it’s time to add a buffer.

You’ll thank your past self for this step, trust me.

Sometimes your income may be especially low. You can ward against this by stashing extra money in a buffer category when your income is higher than usual. When the slow months come around, you can take money out of your buffer to cover the difference.

This can be separate from your emergency fund, or you could bundle them together in the same category. If you dip into it a lot to cover budget shortfalls, you might want to separate the categories to protect your emergency fund.

You don't need to put all of your extra income into your buffer. But the more you add, the fewer skeleton months you’ll have in the future. Of course, if every month is a skeleton month, you may never take money out of your buffer, so use your judgement!

And that’s it! It won’t be an easy adjustment if you’ve never kept a budget before, but it will give your life some much-needed stability.

Oh, you had issues?

Here are some common problems that may crop up. If these happen to you, don’t panic! Take a glass of wine deep breath and tackle it.

I made my skeleton budget, and now I’m overbudget.

Ouch! It’s very normal to be overbudget when planning out an entire month. This is why I recommend printing off the skeleton budget for reference. When you’re actually making your budget with your real income, focus on what you can pay with the money you have now.

It also helps to get one month ahead of your budget.

I don’t know how much I spend – how can I estimate my expenses?

Track them! Look at your bank account online! Or just guess and re-evaluate over time.

I only get paid once every few months, how can I make a monthly budget?

The process is pretty similar, except everything is going to come from the buffer category. You can also over-fund your categories, but this will make it harder to stick to your budget on a monthly basis.

My buffer category isn’t enough to cover my shortfalls. What should I do?

Your budget may need some adjustments, but it sounds like you may be outspending your income. To maintain your spending plan, you’ll need to make an effort to save more during higher-income months.

Of course, you may want to learn the difference between overbudgeting and overspending.

How about it? Inspired to start budgeting your irregular income? Give it a shot and let us know what you think!

Related Posts