It can be a challenge to budget on a variable income, but it is possible! Find out more in my step-by-step guide.

An irregular income can be difficult to plan around. Some months you might be able to live like a king, but others you might be relegated to a diet of ramen. With over 50 million freelancers in the U.S., you aren’t alone on the rollercoaster of a fluctuating income. 

Of course, you don’t have to be a freelancer to have a variable income. You might be an entrepreneur, commission-based salesman, or picking up odd jobs as you can. There is a multitude of reasons why your income might vary. But the common feature is that your income comes in big swings – and you never know when things will rise or fall.

As a freelancer who knows the ups and downs of a variable income all too well, today I’ll share my strategy for budgeting on an irregular income.

Determine your essential monthly expenses

How To Budget On A Variable Or Irregular Income - Determine your essential monthly expenses

The essential monthly expenses are everything you need to live and function. These expenses are the absolute core of your budget – the things that you can’t live without.

Think about your needs such as food, housing, transportation costs, and utilities. It also includes expenses such as healthcare and car insurance. Although these costs may only come around once a year, you need to factor these into your monthly budget. It is important to set aside a portion of these large bills each month so that your budget isn’t caught off guard. 

As you walk through these essential expenses, some may be more difficult to predict than others. For example, fluctuating bills like your utilities and groceries might not be easy to put a monthly number to. When in doubt, try to err on the side of overestimating your fluctuating expenses. With this, the worst that could happen is that you have a little bit of extra money left over at the end of the month. 

Don’t forget about taxes

Although taxes might not be very fun to think about, you can’t forget to include these in your monthly spending projections. As someone with an irregular income, you might responsible for paying self-employment tax. This is only applicable if you are a freelancer or entrepreneur.

If you aren’t sure about how to calculate your tax liabilities, then take a look at MU30’s comprehensive guide. It will help you determine exactly how much you should be setting aside for tax in your monthly budget. 

Add in your extra spending

Although you could survive on the bare-bones budget of only essential spending, it might not be very fun. After all, the little splurges and big lifestyle choices often make life more enjoyable. 

For example, you might not need to take that luxurious vacation across the globe. But if that is what makes you happy, then finding a way to fit it into your budget is important. However, you should be realistic about this discretionary spending. If things get very tight, then you should be prepared to cut back in this area. 

A few things that might be on your list of extra expenses include:

  • Your dining out tab.
  • Streaming services.
  • Event tickets.
  • Travel.

But that is by no means an exhaustive list of everything that could qualify as your discretionary expenses. If you aren’t sure what you spend on extras each month, then you might want to pull out your bank or credit card statements from the last couple of months. 

Set up your bank accounts

How To Budget On A Variable Or Irregular Income - Set up your bank accounts

Before you can comfortably manage a budget, you need to have the right bank accounts in place. At a minimum, you should have a separate checking and savings account. It is important for these two sources of money to remain separate. If you only have a checking account, then you might be tempted to overspend in the good months and be pinched in the slow months. 

Personally, I recommend the CIT Bank Savings Builder for your savings account. With this account, you’ll enjoy the relatively high APY which will help grow your savings. 

In addition to a high yield savings account, you should also have at least one checking account to manage your funds. As you shop around for solid checking accounts, pay attention to the fees. You don’t want unexpected fees taking a bite out of your budget. 

CIT Bank. Member FDIC.

Build a safety net

Once you have the bank accounts you need set up, it is time to build an emergency fund

As someone without a regular paycheck, you might feel that you don’t have the safety net of a steady paycheck to rely on. While it is true that you might not have a regular paycheck coming in every month, that doesn’t mean that you shouldn’t have a safety net. 

In fact, you need a safety net more than most. You never know when a bad month is heading your way. But you won’t have to live in fear if you know that you have an emergency fund in place to help you weather the hard times. 

Most experts recommend building an emergency fund with three to six months of expenses. The idea of building a robust emergency fund might seem like a challenge. I totally understand that! Building an emergency fund can be hard work. But as a freelancer with an irregular income, I can promise you that an emergency fund will help you sleep better at night. With that, it is worth the sacrifices that you’ll need to make to save a substantial amount of money. 

Start living on your previously earned income

How To Budget On A Variable Or Irregular Income - Start living on your previously earned income

Instead of creating budgets on your hopeful income projections, make the choice to live on money that you’ve already earned. That means that instead of spending money that hasn’t come through the door yet, you only spend what you’ve already earned. 

Essentially, you are saying no to debt. As someone with an irregular income, it is especially important to live on your past income. You never know whether you’ll have an A+ month or hear a chorus of crickets as you try to drum up work. Instead of working under the constant pressure of bills that are immediately due, try to live on the income you’ve earned in previous months. 

Pay yourself regularly

Since your income is variable, you might be used to receiving chunks of money at somewhat random times. Understandably, it can be difficult to budget under that regime. An unsteady flow of money is enough to throw anyone’s budget out of wack. 

Although you don’t have an employer passing you a paycheck every two weeks, you can recreate the stable flow of money that a paycheck provides. All you have to do is set up a regular transfer into your spending account. 

That means that each month, you can transfer the money you need to cover your expenses into your checking account. You could choose to set up an automatic transfer. But I would be cautious with that approach. 

Automation can be a great personal finance tool. But without a regular income, you might want to double-check that you can afford to make the transfer before pressing send. You don’t want to be hit with a bank fee simply because a client’s check didn’t process in time. If you really want to automate your paycheck, then make sure to leave a cushion of cash in the funding account. Otherwise, you could easily run into payment timing issues at some point. 

Track your spending

How To Budget On A Variable Or Irregular Income - Track your spending

As you start this budgeting process, you might not have a solid grasp of your current expenses. Don’t worry! Many people are also unaware of their monthly expenses. Luckily, you’ve decided to make a change. By taking action, you are already ahead of the game. But tracking your expenses can help you take control. 

When you wrote out your monthly expenses earlier, you probably forgot something. That’s okay! Everyone makes mistakes, especially when it comes to money. With that, it is a good idea to use a budgeting tool to track your spending. 

A budgeting tool can take some of the difficulty of budgeting out of your hands. Most tools are designed to help monitor your spending and predict future spending habits. These insights can be difficult to spot on your own. But once the pattern is pointed out to you, it is possible for you to make a positive change!

Stay flexible

As you track your spending, you may notice changes to your spending patterns over time. That’s okay! The key to maintaining a successful budget is to remain calm when an unexpected expense strikes. 

Instead of panicking, take a look at your budget for the month. Is it possible to reallocate some of your planned discretionary spending to cover the expense? If not, assess your emergency fund. Does this expense qualify as an emergency? And can your emergency fund cover the expense?

It is okay to spend your emergency savings on unexpected expenses. That’s what it is there for! If you need to, then crack open that piggy bank to stay afloat. Don’t beat yourself up when your budget doesn’t go exactly according to plan.  

Continue saving

How To Budget On A Variable Or Irregular Income - Continue saving

An emergency fund is a great starting point. But it should not be the only thing that you are saving for. In addition to long-term goals like retirement, you should save for short-term goals. Think about your upcoming plans – and what funds you’ll need on hand to make those dreams a reality. 

You might want to buy a house in the near future. If so, you’ll need to build a down payment. A well-deserved vacation will require some saving ahead of time. The responsibility of bringing a pet into your home should come with a cushioned fund to cover all of the expenses that will come with your new best friend

The choices you make in life will dramatically affect your budget. With a variable income, it can be more difficult to plan ahead for these fun parts of life. Make it a point to consider your dreams and make savings goals to match. 


Budgeting on a variable income is not always easy. At some point, you’ll probably want to throw in the towel and revert to your old spending habits. Unfortunately, many of us have reached that point along the way.

Instead of giving in to the desire to make the easy choice of spending your income as it arrives, think about your goals. You might have to dig deep to set up a budget for a variable income. But it will get easier over time.

Read more:

Related Tools

About the author

Total Articles: 56
Sarah Sharkey is a personal finance writer covering retirement, investing, debt, savings, credit cards, mortgages, and student loans. Additionally, she is the founder of Adventurous Adulting, a personal finance blog dedicated to helping readers tackle their money and take control of the adventure of life. You can connect with her on LinkedIn or Twitter.