Today I will show you how to set up your monthly budget when you have fluctuating income each month.
Listen on the Podcast
The 6 Steps to Creating a Budget with Irregular Income
Do you get paid a little differently each month?
Maybe you are an entrepreneur, a real estate agent, in sales, or you you’re a self-employed independent contractor.
If this is you, you need to learn how to budget with irregular income.
Step 1: Find Your 90 Day Average Income
Add up the past 90 days worth of income and divide it by three in order to get your monthly average income.
Example: In January you earned $8,000, February you earned $4,000 and March your earned $0. Your total income over three months is $12,000, which averages out to be $4,000 per month.
Step 2: Determine Your Take-Home Pay Based on Gross Income
Your take-home pay will be based on however much of your gross income you actually pay yourself. Remember, we have to set some money aside for taxes and other business expenses if you haven’t already done so. The take-home pay is what is left over for you to use for your monthly budget.
Step 3: Open Separate Checking Account (Separate Bank)
Out of sight and out of mind.
If you don’t have a separate checking account at a different bank, chances are much higher you are going to rob yourself from your income account. By opening up a separate checking account at a different bank or credit union, the account has two jobs: hold onto income and pay you each month.
Step 4: Choose Your Paydays
There isn’t a right or wrong way to do this. Choose twice per month, bi-weekly, weekly, or however you would like to get paid. Once you have a pay schedule set up — stick to it.
Step 5: Enter Monthly Take-Home Pay Into Budget
Remember, you are creating a zero-based budget BEFORE the month begins. This means you are going to determine your monthly income and where all of the income will be spent (or saved) before the month begins.
Therefore, the first month may be a trial month since more-than-likely you’re reading this sometime in the middle of the month.
Step 6: Readjust Every Month Based on Last 90 Days
Remember, you’re always looking back 90 days from the current month. Therefore, every month you will look back at the latest 90 days and get a new average income.
To see a full breakdown of all 6 steps to budgeting with irregular income, visit the post on the blog where I break down each one in detail.
Grab the Budget Templates Right Here
Now that you have a pretty good idea of how a budget works, I am going to give you the budget templates and walk you step-by-step with how to use them. If you have any questions at all, please post in the comments section below.
Good luck and congratulations on creating your budget!
Thanks so much for listening to the show and if you feel the content of this podcast was helpful, please subscribe to the podcast where you listen and leave a review!
Today’s show was brought to you by OneAZ Credit Union — my very own credit union I have been proud a member of since 2011.
If you live in Arizona and are looking for a large credit union with a local, customer-focused feel for your personal or business banking needs, look no further than OneAZ Credit Union.