Budgeting an Irregular Income

by

Staz Johnson

Whether you have a regular income at the end of the month, week or fortnightly, or even if you are paid by commission, you will need budgeting plan for your personal finances. If you have an irregular income such as commission, you will need to be even more conscious of your expenses versus you income so that you are better able to live within your means even when you have not been paid for a longer while than usual. Without a doubt, variable incomes are more difficult to budget on than it is to plan on a regular income, but it is by all means doable.

Not knowing how much you will earn per month can be rather unsettling and for this reason, people who work on commission should have saving as a key component to their budgeting plan. You will need to save a larger percentage of your income than people who get a regular income in anticipation of a lower income next time. Variable incomes are typically the case for self employed people, small business owners and people who work on commission for say car sales and other commission based jobs.

As with budgeting on any type of income be it regular or irregular, you will need to list what you typically spend your money on and determine which ones are fixed expenses that you cannot get away without paying and which ones are simply frivolous expenses. Anything you have extra from your expenses you should put into your savings. You will also need to prioritize your expenses and if your income is lower than you expected, then you can easily see what items you can do without that particular month so that if possible you can still top up your savings.

Each time you find out how much you will earn, you should work with your list of expanses and tick what you can spend that month and what you can do without, always remembering to leave a sufficient amount for your savings.

Budgeting on an irregular income also needs more discipline in lowering your debts more than for a person who is on a regular income. With a volatile income, you may not always be able to meet your credit repayments and this could hurt your finances with increase in interest rates as usually happens with debt repayment. Try to keep your credit card use to a minimum and do not use it unless you have no choice.

On the months that you earn less than normal, if you have been saving regularly, you can then withdraw part of your savings to make your necessary payments. You will in slow months need to be even more frugal in your expenses making sure you do not find yourself in a situation where you have drained your savings and your backup money is completely depleted. Your budgeting plan is even more important in slow months in ensuring you make it to the next good pay without too much financial strain.

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