One of my former jobs was a 10-month position. Each May meant that for two months I would have no income until August. My husband was working, but as an adjunct college instructor, which meant his schedule (and income) also fluctuated. It was a struggle to keep to a budget.
My husband now has a consistent salary, but as a work-at-home mom, my income fluctuates from month-to-month based on what projects I’m working on. My husband also has several side gigs that bring in money, but those fluctuate, too.
Fluctuating incomes aren’t just hard to budget, they’re hard on your emotions. In a good month, you tend to feel confident and good about money and tend to relax your thrifty ways in favor of splurging a little. In months where there is less money coming in, it’s easy to feel deprived and jealous. It’s easy to feel stressed out and overwhelmed.
How to Budget With a Fluctuating Income
I’ve learned how to deal with inconsistent paychecks by following these steps:
1) Know what you need to survive. To effectively manage any budget, you need to know what your expenses are. You can start by tracking your expenses for a few months, and then make note of less frequent expenses like holiday shopping or car insurance. I personally love using You Need a Budget (YNAB), but even if you just use pencil and paper you’ll do fine.
You need to know exactly what you need for food, clothing, shelter, household sundries, health care, etc., each and every month.
2) Know what your baseline salary is. Look back at your income over the past 6 months. If it doesn’t fluctuate a lot, you can safely average your income to figure out a baseline. If your income fluctuates wildly, you should consider the lowest month’s salary as your baseline. Now you know how much money you need and what you have to work with each month.
3) When income is up, save more. You know the bare minimum you need to meet your expenses, so use your income to cover those and put anything leftover in a savings account. You’ll need this money for when your income dips.
4) Look for ways to bring in extra money that you can tuck away. Chances are good that if your income goes down at times it is because you’re not working. Use that time to bring in a little extra money. You could take on odd jobs, babysit, sell some of your stuff online or locally, take online surveys or earn money through Swagbucks. You could do some freelance projects through Upwork or use Fiverr or Mechanical Turk to make a little extra cash. Those little bits of money can help you keep your chin up when money is tight.
5) Live on your savings when income is down. Remember that money you put away when your income was up? It’s time to use it, and use it sparingly. If you’re not sure how long the downturn will last, you’ll need to make that money stretch.
6) When your savings has been depleted, return to Step 3. You may also need to work at trimming those expenses even more. You will need to repeat these last steps as your income cycles up and down.
A few other tips for budgeting with a fluctuating income
If you’re in debt, work on paying it off as soon as possible and then stay out of debt. Debt makes it nearly impossible to break out of paycheck-to-paycheck cycles and can hold you back from taking more meaningful employment. Head to the library for some books that will help you get out of debt.
You may decide that a fluctuating income is simply too stressful for you to live with. If that’s the case, you will need to figure out what steps you can take to change your situation. Can you talk to your current employer about more consistent scheduling of work hours? Can you find a different job that offers regular income? Will you need additional schooling to get that job? Would getting a second job alleviate some of the job stress? Sometimes having a “side gig” makes all the difference.
Remember, a fluctuating income isn’t necessarily a bad thing because it is a reminder that even the best budgeters need to be conscientious about their spending. The low-earning months are good reminders to get rid of unnecessary expenses. The higher-earning months remind us to save for a rainy day, to give when we can, and to invest in our futures.
Now it’s your turn: How do you budget for a fluctuating income?
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