How to Budget When You Don’t Get a Regular Paycheck

List Monthly Expenses

With any budget, the first step is to sit down and start listing out your monthly expenses: food, shelter, transportation, insurance, entertainment, shopping, etc. There are two major questions to help frame how you budget, especially when your income might be unpredictable: How much do you need to survive and are the items on your list a want or need? On average, an American family of four needs at least $58,000 per year to get by, but this can vary greatly depending on where you live. Once you have your list you should ask yourself with every bill, is this necessary for me to get by? If the answer is no, then that item is a “want” and if it’s yes it’s a “need.” As you probably know, a “need” is something essential to your life like food, insurance, housing, and electricity. Depending on your situation, you may also have expenses such as student loans or pet costs that need to be factored into this budget. “Wants” are those things that enhance your life, such as entertainment, travel, eating out or shopping, but you could probably do without or cut back on when necessary. Within your budget, your needs are going to come first, though it’s important to find a balance between the two and to be honest, even though you can’t continue living without your needs, your wants add positive value to your life and may find it hard to cut these out. For example, a vacation would fall into the want category, but vacations are great for reducing stress and maintaining a happy lifestyle. There’s nothing wrong with treating yourself once in a while, just so long as you planned for it.  

Speaking of planning for it, once you’ve calculated your baseline expenses and identified “wants” vs. “needs” in your budget, then it’s time to set individual saving goals. Having savings on hand is important no matter what, but even more so if your income fluctuates and you instances where you dip into savings might be more frequent. You’ll want the objective to be specific and realistic. Determine short-term (emergency savings), goal-based (medium-term savings), long-term (retirement savings), and “spending account” goals. Depending on where you are in your financial journey, priorities will vary. To pinpoint which stage you’re in check out this article and while managing with a variable income, don’t forget to save into what we would call a “spending account.” This particular account is meant to consistently cover your costs from month-to-month, no matter what your income is at the time. Also, another rule of thumb when figuring out how much or where to save is the 50/20/30 guideline. This rule says you should put 50% of your paycheck into fixed expenses, 20% towards savings and 30% for the fun activities like going to restaurants and taking vacations. 

Save for Emergencies 

After brainstorming your goals think about an emergency savings fund. If you’ve already started one, then you’re ahead of the game, but if not- begin building a stash of at least six months’ worth of expenses. Depending on the industry you work in and how drastically your workload can fluctuate, erring on the side of caution and stashing up to even a year’s worth of savings to cover necessary costs is a great safeguard against debt for freelancers. You may want to double your cash stockpile. Having the extra funds ahead of time will allow you more flexibility and assurance that even if work slows down, you have a cushion to fall back on. If you’re still building up this account, work that cost into your budget until you reach the right number. After that, you can redirect that line item into other types of savings.  

Make a Habit 

Once you’ve figured out the right balance within your budgeting plan, apply it to your everyday life. According to Jeremy Dean, an author, and psychologist from University College of London, it takes the average person at least 66 days to make or break a habit. That’s a little over two months so once you start saving keep it up and just remember if you’re going to spend or save do it with purpose. The concept of budgeting and developing your strategy to cover your necessary expenses is crucial while living with an inconsistent paycheck. Your paychecks may come in different amounts, but with determination and a solid plan, you’ll be on track to enjoying your life without the money stress.