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What Are the Best Tips for Budgeting an Irregular Income?

Autumn Rivers
Autumn Rivers

Many small business owners and freelancers alike have irregular income, which means they do not know exactly how much money they will make each month. This can make it challenging, but not impossible, to budget for bills. One of the most important tips in such a budgeting scenario is always to have a savings account with at least one month's worth of expenses saved up, in case income slows down or clients are late paying. Another tip is to prioritize expenses when budgeting, which usually includes listing the bills in order of when they are due and how important they are. It also can be helpful to project monthly income when making a budget, typically using either an average or a minimum amount that can be relied on every month.

In many cases, people with an irregular income have several sources from which they get their money, which is why a savings account is often good to have for backup. For many freelance workers, there may be plenty of work one month and none the next; even when they have steady work, their clients may pay late. Unless they have money left from a previous month, waiting in a savings account for just such an occasion, they may end up paying bills late because of a lack of available funds. Those who place extra money in a savings account should make sure they can access it without any penalties, but they also should avoid spending it unless necessary, which means some financial self-control is usually needed for this budgeting tip to work.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

Another suggestion is to make some lists of monthly expenses, one of which should feature all bills and their due dates so they can be paid as they are due. This is especially true for those with irregular income who are paid often, such as every week, because they can simply use each paycheck to pay that week's bills. It also may be helpful to list bills in order of importance, in case only a percentage of the bills can be paid on time. For example, most people need to pay for their housing, groceries and any tools necessary to make money. Once they are sure they are able to pay for their home and food while working to make more money, they can pay the other bills.

Most people hope to avoid having to decide which of their bills to pay and which to hold off on when they have irregular income, and correctly calculating their monthly income can help. Those with steady income that only changes moderately may wish to add up their total paychecks every month for the past year and then divide that number by 12 to get an average of their monthly earnings. On the other hand, some people make a lot of money one month and very little for the next few months. In this case, it may be better to figure out the least amount that they will have available each month and budget their expenses based on this, with any extra money going toward their savings account. This way, even people with irregular income can be comfortable enough financially to pay their bills on time while also building up a savings account.

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