3 ways to budget when you don’t have a steady paycheck
It’s hard to know if you’re a savings superstar if you don’t know exactly where your money goes each month. And when you’re self-employed, a student, or work on commission, the absence of a consistent paycheck makes budgeting a real challenge.
Here are three options for budgeting with an irregular income:
Zero-based budgeting. Essentially you “spend” every dollar you make by allocating where each dollar goes every time you get paid. Start with your essentials (mortgage/rent, utilities, etc.) and work your way down to nonessential categories, including any savings or debt pay-down goals. If you’re fortunate enough to have excess cash flow, you can then make a conscious decision on where that money should be allocated.
Month-in-advance budget. Building on the principles of zero-based budgeting, this approach challenges you to determine your monthly expenses and then save enough to cover one month’s expenses (it may take you a few months to do it). Create your new budget based on what you made last month. Save the current month’s income for next month. You’ll easily know in advance when you might need to look for more ways to save or bring in additional income during a lean month.
50/20/30 approach. Based on the book All Your Worth: The Ultimate Lifetime Money Plan, the 50/30/20 rule of thumb is to break each paycheck you receive into three categories, with 50% going to fixed costs/essentials, 30% allocated for flexible spending, and 20% going to savings/investing goals. It works best for those who are not carrying a lot of debt.
Regardless of which approach (or combination of approaches) you use, the key is to stick with your budget and make adjustments as you go. You’ll be in a far better position to make sound financial decisions with some sort of plan, rather than no plan at all.
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