How to Budget on an Irregular Income

Budget on an Irregular IncomeIt’s predicted that nearly half the UK workforce will be self employed by 2020. Workers sick of a lack of flexible hours, low pay and wrestling with nightmarish commutes are leaving to go it alone in their millions.

There’s no doubt that running your own business is no picnic. However, freelancers or ‘Home office MDs’ do have the advantage of working when and where they want.

There are also loads of platforms out there – like People Per Hour or Upwork – which can help you to get your first gig. What’s not to like?

But there is one major drawback to being your own boss – your earnings are not secure. Even if you are the world’s best business person – you will probably have lean months where work will be thin on the ground or non-existent (despite being a billionaire, Richard Branson has nine failed businesses under his belt…)

If you’ve been a wage slave for years and used to getting paid on the same day each month, this might come as a shock, especially if you’re the bill payer. You might clear £2,000 one month but just £20 the next.

So, if you’re a self-employed or thinking about going it alone, you need to look at your money differently and learn how to budget on an irregular income.

If you’re clever about it, having an irregular income needn’t be a problem, you just need to plan for every eventuality. Here is how to budget on an irregular income……

5 Ways to Budget on an Irregular Income

1) Create a Budget or Spending Plan

Creating a budget is the very first thing you should do when you have an irregular income or are self-employed.

Budgeting is only possible when you have a regular pay packet, isn’t it? Wrong. In fact, having a budget is even more important when you have an irregular income or are freelancing.

A spreadsheet detailing your outgoings will create a target you need to hit each month. There’s no point in working for yourself if you have no idea what you need to earn.

So set up a budget. List what you need to pay out each month (mortgage/rent, bills, food, clothing, insurance and transport). This is your target.

Then list all your other expenses. This is your secondary target. Add them both together and there’s your magic ‘must-earn’ number.

Related: How to Create a Spending Plan That’s in Alignment with Your Values

2) Be Strict With Yourself

It may be tempting, if you have worked your socks off and your client sends you a pile of cash, to splurge it all.

But remember, down the line you might have a month where you earn next to nothing. So when you get paid, apportion your money out like this:

  • Pay your necessary expenses (rent, bills, food etc.)
  • Pay other expenses – these could be business-related, so, if you think you will earn more than your personal tax threshold, put money aside for your tax bill. Or pay for your subscriptions/stock.

3) Cushion Yourself with Savings

As well as paying your bills and other expenses, put any leftover cash into a savings account. This fund will cushion you when you have less work and help you cover any emergency payments.

4) Don’t Drop the Ball

The golden rule of freelancing or self-employment is: when you’re riding high, don’t rest on your laurels.

You’ve got yourself a few decent clients and are working hard for them. But what about in six months’ time when those clients go quiet? You should always be looking to win the next job.

Make time every week on your calendar, even if you are busy, to do your marketing. Don’t underestimate networking both online or offline at events and among former colleagues – six months down the line they might come through with new work.

A recent study revealed an astonishing 85% of all jobs are filled via networking so dust down that business suit and start practicing your best handshake.

The key to successful freelancing or self-employment is always keeping an eye on future work.

5) Build Future Wealth

Being self-employed doesn’t mean always living hand-to-mouth. Think about how you can use your earnings wisely in order to build wealth for the future.

This may mean using your earnings to invest in your business, investments such as stocks or yourself through training and qualifications.

Also, look into investments such as a Lifetime ISAs which can boost your wealth in the future, while you run your business in the here and now.

Over to You 

Are you self-employed? How do you budget on an irregular income? Do you find it difficult to live on an irregular income? Share your tips with us in the comment box below, we’d love to hear from you!

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9 Comments

  1. I wish I was disciplined enough to do a budget, every time I do one, it never seems to last long. Good ideas here though!

    1. Hi Candice, thank you for taking the time to leave your comments. Creating and sticking to a budget can be really tricky but it is key to financial success and building sustainable wealth. Check out our handy guide on “How to Create A Budget and Stick To It” for tips to help you stick to your budget.

  2. We have an irregular income and having savings for emergencies is key to surviving. These are great tips.

  3. Karlene Parco says:

    Hi.. Thank you so much for this article.. for almost 10 yrs I’ve lived by pay checks. Over a year ago, i decided to quit my job and start a small business. I am struggling. I am doing some of what’s in this article already but have not been that strict. This article is a like an eye-opener for me.. Thank you so much, I will be reading the related articles to learn more.. 🙂

    1. Hi, Karlene I am glad you found the post useful and you are already doing some of the things in the article which is a big step forward. All accomplishments start with one step and by simply taking the first step, you are moving towards your financial success. Thank you for taking the time to leave your comments.

  4. Great post! Potentially starting a freelance job soon but instead if being self employed I’ll be working for an agency. If all goes well my income will be regular but if it goes quiet I can get dropped pretty easily.

    Such a good idea to come up with a bigger spending plan with a ‘must earn’ number as well as a cushion.

  5. Constantly saving is key for those with irregular income. Like you said, yo never know when you’ll have a bad month as a freelancer or even as a successful business owner.

    I personally believe in budgets and am lucky enough to be disciplined when it comes to money. In fact, me having an irregular income isn’t a problem for us. We just budget according to my other half’s income and just use mine as a ‘cushion’ if we need to 🙂

  6. Hi Adriana, thank you for taking the time to leave your comments and sharing your insight. I totally agree, the key to successful budgeting is saving. Living on one income although not always easy is a great way to build an emergency fund and future wealth.

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