In 2023, The Federal Reserve reported that 28% of U.S. workers had an irregular income that varied at least occasionally from month to month.1 And with the rise of the gig economy, variable incomes may be here to stay.
Budgeting with an irregular income, also called a fluctuating income, can present unique challenges. When income changes from month to month, it can be challenging to plan for expenses and save effectively.
This articles explores practical strategies to help individuals budget effectively despite the unpredictability of earnings.
For people with an irregular income, the first step should be to assess if one has an income pattern. Keeping a record of all sources of income, how and when they were earned, as well as every expense is essential to gain a clear financial picture.
Tracking income and expenses can help identify trends — such as what months, days, or periods of each day are the most profitable — and inform personal financial decisions. By consistently monitoring these fluctuations, individuals may be able to better anticipate lean periods and plan accordingly.
Irregular income jobs come in various forms, each with its own unique characteristics. The categories below describe irregular income and give examples of the jobs included in each:
Creating a budget with an irregular income requires careful planning to ensure essential expenses are prioritized.
Here are two examples of calculating irregular income:
When building a budget, it's recommended to prioritize monthly fixed expenses that must be covered regardless of income fluctuations. These include:
Allocating money for these fixed expenses as soon as income is received may help to maintain financial stability. Once essential expenses are accounted for, budget toward variable expenses, such as entertainment, dining out, and non-essential shopping.
An emergency savings fund is an account set aside to be used specifically in case of emergency, helping to manage unexpected expenses or income shortfalls.
Having an emergency savings account can be really helpful, especially for those with irregular incomes.
Potential benefits of an emergency fund include:
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Even with an irregular income, it’s possible to build an emergency fund gradually. Here are some strategies to consider:
There are various budgeting tools that can help those with irregular incomes. These include:
Budgeting with an irregular income can be challenging. But with the right strategies and tools, long-term financial stability is possible. It’s important to understand income patterns, build a solid budget, prioritize essential expenses, and gradually build an emergency fund.
Remember these tips:
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