Everybody knows the importance of creating a budget to keep your finances on track. There are some situations that make creating and sticking to a budget difficult. Irregular income is certainly one of these. If one or both wage-earners in a family are self-employed or work at jobs that do not pay on a traditional regularly-timed, predictable earning schedule it is hard to know how much money is going to come through the door each month.
Unfortunately, the world does not provide exceptions for those of us with irregular incomes. Your bills are due on the same day every month just like everyone else’s. The same goes for your other expenses – you have to eat roughly the same amount each day regardless of how much money you currently have in your bank account. This means that those of us with irregular incomes cannot excuse ourselves from making a budget.
Budgeting for irregular income can be done, just not in the way that those people with regular incomes would do it. One thing that helps a lot is to create a monthly sample budget, so you would know where your money would go if you were bringing home the same amount every month. Having a sample budget is also very helpful in that it gives you an idea of how much money you need to cover your expenses each month. I also keep a list of irregular expenses that occur very few months or once a year so that I know when they are coming. On your sample budget, include all of your recurring expenses, the amount of each, and the date that they are due. For flexible categories like food, list an approximate amount.
Once you have your sample budget, begin each month by prioritizing your expenses. Pay attention to the importance of the expense as well as the due date. It does not do any good to pay your car insurance on the 5th if it is not due until the 20th if there are other bills or expenses that should be paid first. It may help to break some expenses into smaller chunks so that, for example, you do not set aside your entire food budget for the month when you get your first check. You could set aside half of it, and use the rest of the check to pay other expenses, knowing that later on in the month you will receive payments that will provide for the other half of your grocery budget.
Another helpful thing that you can do is to use cash for your flexible spending categories such as food and entertainment. You can stash your cash in envelopes marked with the name of the category. Using cash provides a tangible reminder to spend those dollars wisely because when the envelope is empty, it is empty. I have lost track of how many times this has stopped me from making an impulse purchase, this habit has truly been a life-saver.
One more thing that can really help those of us with irregular incomes is setting up a short-term emergency fund of about one month’s worth of expenses. During particularly profitable months, you can set aside some money that you can draw upon during leaner months. I have not been able to do this yet, but I am hoping that I can because it sure seems like it would provide a great deal of peace of mind.
Photo by cohdra on morguefile.com.