How to Budget with an Irregular Income

At FCTG it’s not uncommon for our people to have an irregular income. If you’re in a customer facing role you’ve definitely experienced variable pay periods. Remember, even if you can't predict your income precisely, having a budget will create a spending plan for your money that includes paying down debt and saving for a rainy day. If you struggle with keeping a budget due to having an irregular income, there are ways you can avoid the feast or famine rollercoaster of ever-changing cashflow.

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Create Your Budget

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The first thing you'll need to do is actually create a budget that is unique to each month. Be as exact as possible. What does your spending look like around back-to-school time, the holidays or one-off events like moving? Accounting for all of those things in a written spending plan will be a crucial first step.

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Once you've got all your expenses in hand, add them up to get a total. Now that you see how much money you are spending each month, ideally, you'll have enough income to cover all of your household expenses.

Looking for a Cashflow Tool to get you started? Reach out to your local benefits team for resources they might have, alternatively, you can access the Moneywise Global Cash Flow Tool here but note, it’s in AUD so you might have to make a few adjustments.

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Forecast Your Income

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In the previous step, the best-case scenario is that your income either just covers or exceeds your expenses. If that's not always the case due to lower-income months, then you'll want to figure out the lowest amount of money you'll ever make in a given month.

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If it's not enough to consistently cover your monthly bills, then you'll want to take money from your higher-income months to cover the lower-income months. We'll discuss some practical ways of doing that below.

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Save the Extra

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A few practical things to do:

1. Make sure you actually put money aside when you've got a budget surplus (higher pay month):

2. Open a separate savings account and regularly contribute to it, especially in months when your income will be higher than usual and well-outpace your expenses.

3. Create a small auto-deduction from your current account into this savings account to add “oomph" to your savings habit. You can never have too much money available to cover you in the times where your income is lower.

4. Have an emergency fund (in a separate savings account) that is for the sole purposes of covering emergencies and not regular, budgeted expenses. An emergency expense is one you could not foresee or budget for and truly need. (For example, finding a cute pair of shoes on sale, is not an emergency but fixing a flat tire on your car is.)

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Fix Your Cash Flow

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If you still experience months where you are stretched too thin money-wise, there are a few other things you can do to keep yourself afloat: Reduce expenses in some areas, perhaps entertainment, subscriptions services, eating out or expensive hobbies.

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Try and reduce credit card spending when you're able to foresee periods where your income might be a little lower than normal. If you do find yourself unexpectedly reliant on your credit card during lower-income months, try and use some of your emergency savings to meet the repayments, this should give you a little more wiggle room.

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Increase your income. Of course, this sounds easier than it really is, but it's not impossible. It could mean getting an additional part-time job, moonlighting in a trade that could add extra money to your budget or tapping into the lucrative side-gig economy.

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Dealing with the reality of irregular income doesn't have to be stressful if you have a proactive plan in place. Be sure to maintain a budget and update it as you learn of changes like an unexpected boost to your income or expenses. This way, you'll be in position to make progress with other financial goals like paying down debt, building wealth or planning for larger purchases.

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Portions of this article were sourced from the Wellbeing Centre as part of myRewards in Australia.