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11 Ways on How to Budget Consistently Without a Steady Income

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how to budget without a steady incomeThere are two major necessities when it comes to budgeting: a steady income and thorough planning. The latter is something anyone with a regular or irregular job can do; the former, not so much.

Individuals who are either self-employed or work for commission e.g freelancers, salespeople, etc. struggle to keep a steady budget, given the nature of their jobs.

Their unpredictable and fluctuating incomes make it hard to know three essential stuff that goes hand in hand with the budgeting process:

  • The exact amount of money to expect
  • When it will be available for withdrawal
  • How much they’re to expect the following month

Unbelievable as it may be, these are common occurrences in the lives of members of the ever-growing gig economy. It gets pretty tough when there’s a rise in income one month, then a drastic (and painful) drop in the next.

While budgeting advice is anchored on a steady paycheck, it doesn’t really apply to individuals who are completely uncertain of what to expect from their unstable income. This post gives in-depth ideas on how you can budget consistently even when finances are tight on your end.

Let’s take a different turn and focus more on how to come up with a strategic spending plan despite an inconsistent income.

1. Develop an Emergency Fund

Developing a concrete emergency fund will keep you financially secure in case things go south. Especially if you’re self-employed, you’ll need to make ends meet in one way or another.

If your income is not so dependable, it may be challenging at times to develop a reliable emergency fund. And that’s fine.

Even if you don’t depend on a stable weekly or monthly income, it’s not the end of the road. Here are four reliable ways to build a decent emergency fund :

  • Get a Part Time Job

Having an irregular income has its upsides and downsides. A major downside about receiving a shaky income is having very little to put into your emergency fund. Take a step and work extra hard. Increase your income sources by considering various ways of earning some extra cash if you wish to get there faster

  • Put Aside as Little as a Dollar Every Month

Even if you won’t have much to spare, there can still be something left to spare. Here’s where drafting a budget comes into play.

Budgeting will help you to get a clear picture of what you can spare for your emergency fund. Though drafting a budget on an unreliable income is intuitive, doesn’t mean it’s not possible.

  • Spend Less

There’s no doubt that the cost of living nowadays is pretty high. Even so, you can still be able to cut a few stuff like beauty, entertainment, and cleaning costs as well as insurance premiums.

The money you use on these expenditures can be used to boost your emergency fund and stretch it to last you a little longer in case of anything.

Irregular incomes shouldn’t be a stumbling block from building your personal emergency fund. It may take a while before you save up something substantial, but the money you set aside can still be useful in more ways than one.

2. Have a Clear Plan for Your Unpredictable Income

Individuals whose income is predictable and have a regular paycheck can set a limit on their different categories of expenditures. You, however, must operate on a ‘backward’ pattern – start by knowing how much to spend to determine how much you need.

Ensure that your expenditures are stable, repeatable, and predictable, contrary to your income. The 50/20/30 rule clearly states that expenditures are majorly categorized into three: lifestyle, priorities, and necessities.

Those in the ‘necessities’ category require monthly financial attention. Failure to allocating a certain amount to these items can lead to a disastrous lifestyle:

  • Transportation

Putting your job(s) into consideration, allocate the least possible transportation cost. Think about whether or not you need to spend huge on gas expenses, garaging costs, maintenance, auto insurance, etc. If there’s a good network of public transportation, put it into consideration as well.

  • Housing and utilities

Most working-class individuals consider mortgage or rent to be essential expenses. Include either of these as well as your monthly minimum housing cost into your income allocations. Be sure to include property tax bills along with homeowner’s insurance in your total.

  • Medical costs

Excessive medical costs is a major cause of bankruptcy among individuals on a payroll. This is why you should have a health insurance plan in case of any unexpected high-cost health care expenses.

  • Groceries

When planning on how much to set aside for groceries, set a reasonable price. Cross out extras such as stops at the coffee shop or restaurants – unless you’re using these spots for business meetings.

Coupon more to cut back on your food expenses. For the first few weeks, track your spending to know where and how you spend your money.

3. Save in Terms of Percentage

Saving a minimum of twenty percent every month is highly recommended. Your retirement account(s) should receive at least 12% – 15%. The rest of the 5% – 8% should go into coming up with alternative savings for the long-term, your emergency fund or paying off huge debts.

Start by looking at your goals and figuring out how much to set aside for each. Financial goals are generally categorized into short-term, long-term, and, if necessary, extremely long-term.

Taking your monthly income as 100%, equally divide your income into equal percentages based on how important they are.

If you’re unable to automate your savings in terms of percentage, stick to doing it manually. At the end of every month, for example, sock away a sizeable percentage of your income for your taxes. Divvy up the rest of the amount for your emergency fund, gift fund, art fund, etc.

4. Open More Than One Bank Account

Setting up multiple bank accounts is a sure way to keep your funds intact and keep you from borrowing, which may lead to debt later on. Having more than one account will ensure that you save as much as you can for personal and business needs.

While having a single bank account can be less stressful, it doesn’t offer the following benefits that comes with operating more than one savings account:

 You’ll have more savings goals

Opening more than one account enables you to track how much you’ve saved in each individual goal. If you find that you’re saving more on one goal than the other, you’ll be able to see what you can do to balance all your accounts.

You get to know which banks to work with

If you’ve always been indecisive of which bank account to open an account in, there’s no harm in owning more than one account. Creating multiple accounts will enable you to pick out the banks that fit your personal interests.

You can withdraw on a regular basis

All savings and money market accounts are limited to only six withdrawals every thirty days. By opening five accounts, you get to withdraw funds up to a whopping thirty times a month. Rather than depleting your accounts, be sure to channel the money you withdraw to developmental stuff.

You can enjoy all the perks from each bank

ATMs near your home or workplace may be cool, but online banking offers more than this. Most institutions nowadays give you a bonus when you open an account. As each bank offers their own individual benefits, having accounts in more than one means you’re entitled to all their cool offers.

Your financial habits will influence greatly how you handle your savings. A group of experts recommends having a savings account linked to your checking account, while others strongly advocate setting up multiple accounts for different savings targets.

5. Handle the Extra Paychecks Very Carefully

Extra paychecks – what’s not to love about them? If you work a couple of side hustles and receive your payment every Friday, there have to be one or two months of the year where you’re eligible for an extra paycheck.

Depending on how much you make, you may be tempted to squander it right away on today’s wants. You should, instead, see the bigger picture and spend it on tomorrow’s needs.

Be it $5 or $1,000, that extra money can be used to cater for more important stuff such as fueling your car, paying off your credit card, etc.

Make sure that the extra money goes toward something rational an intentional that will be of use to your in the long run. One way of lightening your financial burden would probably be to extend your planning by one month.

Even better, make regular contributions to long-term goals such as your retirement and savings. Doing this each time you get an extra paycheck can impact your future life immensely.

If you’re in January, think of how you’ll have enough money in your account to cover your living expenses by February. Think of the useful stuff you can do with those three extra paychecks every year?

If it goes toward your ‘planning ahead’ fund, you’re destined for a brighter loan-free future.

6. Last Month’s Income Can Come in Handy

On the first of the following month, deposit the amount into your account. When you finally get paid, do the same for that amount the following month.

Aside from getting an alternative way to survive, there are other benefits associated with relying on the previous month’s income:

You spend less than what you actually earn

If you get to the last day of the month without touching a dollar of your savings, you’re actively using up less than your average income. That’s a huge milestone in how you handle your finances on a regular basis.

Monthly budgeting is made easier

If you always budget on a regularly, then you understand how complicated it can be. By depositing a certain amount every month, you already know what to do with it, considering you use the same budget every month. As you deposit a certain amount in your emergency fund, you’re always left with something on the side.

Financial stress will be a thing of the past

Earning income on an irregular basis can take a toll on you, especially if you don’t know how to spend it. There’s a sense of financial freedom once you start planning for the next month’s expenses a few weeks in advance.

Having drafted your clear and concise budget in place, add up all your unnecessary expenditures in order to know how much you need to make it through the month.

If the total amount is enough to cater for your month’s needs, you won’t have to mess with the cash in your savings.

 7. Base Your Budget on Your Lowest Paycheck

When there’s a fluctuation of income from one paycheck to the next, depending on your average sources of income, try anchoring yourself on the highest earnings.

If you’re, for instance, a rideshare driver and make approximately $800 per week, and make $250 per week, draft a budget based on your rideshare driver paycheck.

As tempting as it may be to say that you make $600 every week, you risk overspending as this is not what you’d earn every other week.

Anchoring yourself on the paycheck with the most earnings will make you feel better. Plus, whatever else you make throughout the week will come across as a bonus.

As you don’t enjoy the privileges of a regular income, give yourself a goal each month, then base your budget off that. If you surpass your minimum income goal, the rest will automatically go toward your savings goals.

Once you get the hang of keeping your expenses to a minimum, you won’t struggle with financial stress each time you have a lull.

 8. Download Useful Apps to Track Your Spending

If you’re struggling to get your finances in order, especially on an irregular income, there’s a wealth of app options you can use today. A single app can do for irrelevant stuff like notes, calendars, etc., but no one app will do when managing your money is involved.

It would really help to know how you spend the previous month’s money. You wouldn’t want to risk depleting everything and start spending the cash in your savings, would you? If not, why not use these free apps to keep your spending in check?

Mint

Mint is probably the most popular expense tracker app out there. It’s a user-favorite financial tool mostly because it’s free, is a product of Intuit (a leading financial software unit) and supports a variety of lenders and banks.

 Clarity Money

This is a financial app that comes in both mobile and online interfaces.

It’s easy-to-navigate layout makes it stand out as a reliable spend-check app. It also includes a unique feature that allows you to track your credit score, track/cancel subscriptions, and add cash to your savings.

You Need a Budget (YNAB)

The creators of this app seriously believe in budgeting and tracking your expenses. If you want to start budgeting and tracking your expenses in one place, YNAB is the best app to use. Its updated version allows you to import expenses automatically from your linked bank account.

Wally

Wally was created specifically for Millennials. It’s an integrated app for tracking expenses in a rather insightful way. It features attractive social features and graphics that make it more appealing to the younger generation.

It makes use of trendy technologies such as artificial intelligence. It has a feature, ‘a la Venmo’, that supports shared expenses.

Other useful apps you can use include: Personal Capital, Penny, QuickBooks, and Mvelopes.

9. Do a Total of Your Month to Month Income

Do an all-year-round cash flow and map out the year’s projected income to find out what your hills and valleys in income. Members of the gig economy live on a month-month basis due to their unpredictable income.

It should be understood by now that every month comes with its own seasons. Being fully aware of when to expect either a high or low income will enable you to plan accordingly for the months associated with these seasons.

Calculate what you earn on a yearly basis in order to plan for the future. This will impact you to think of yourself earning on a yearly basis, rather than an hour.

For example, once you’ve done your totals, don’t think of earning $15 per hour, rather, you’re making $30,000 on a yearly basis. The reason for doing so will make saving small for retirement feel more reachable.

Track how much money you’ve made on average in the past three-six months. If you’ve been working at home for more than twelve months, base your annual income from the previous year’s. It’s not really a flawless science, but it provides you with a few figures to work off of.

10. Know When to Modify Your Savings Goals

What happens when your savings goals exceed your monthly income? This is actually a common problem among individuals with unrealistic savings goals. First, assess your goals and modify it where necessary.

Can you throw a less extravagant wedding? Go for a cheaper house with a slightly less down payment?

Second, consider ways you can cut down your current expenses. For example,  save up to $50 or $60 per month by canceling cable TV. This money can be very beneficial to either of your savings goals.

Next, see if there’s a possibility in extending the timeline of either of your goals.

Is there a need to replace any of your appliances or can you use them for a few more years? Finally, see if there are ways you can earn more money to cater for the excesses.

At the end of it all, your major concern should be how much you’re saving. Based on this, you’ll be able to draft goals that go in line with the limit of your savings.

11. Try Using the Non-Negotiable Strategy

When you find that your budget is rather flexible due to a high income, try zero-sum budgeting. It’s pretty straight-forward, to say the least.

Write down the total earnings of the previous month on a piece of paper, then subtract the total cost of your budget.

Allocate every dollar of the remaining money to additional spending, up to the moment when you’re left with nothing to spare.

For instance, if your income last month was $2,800, and your non-negotiable budget is $1,500, you will be left with $1,300 to allot between your goals and your wants.

When you break it down further, $500 can be spent on house savings, $200 for debt payment, $200 to your emergency fund, $100 to a holiday vacation, $100 for business reinvestment, and $200 for fun stuff and entertainment.

The calculations you make should be in line with your various financial goals. having accounted for each dollar, you’re more likely to spend on goods you need, rather than those you want.

A Fluctuating Income Should Never Stop You from Budgeting

As most of us seek greener pastures from regular jobs and look for better ones, there are inevitable challenges we must face. Irregular incomes are nothing to worry about; they’re simply a fresh opportunity to learn a new style of living and earning.

With each passing day, more and more Millennials are branching out to the unknown.

There’s a heightened control and flexibility that comes along with being your own boss. Through it all, the good outweighs the bad.

The challenges (most of them are mentioned above) that come along with earning an irregular income can cause you to question your decision of budgeting every month.

The struggle of having to cope with a fluctuating income can be a tough transition to deal with – especially when you don’t know when you’re going to get paid.

By following the tips provided above, you’re sure to have a less-stressful time figuring out where you should spend your income. Quit transferring money from one account to another. Find a clear balance between your financial goals and your bills.

Those irregular bills can, in more ways than one, empower you to take control not only of your finances but your life and your career as well.

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