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Budgeting

How to Budget With an Irregular Income

So, maybe you’ve got an irregular income—meaning you don’t make the same amount of money every paycheck. If that’s you, you aren’t alone. Plenty of people work hourly or commission-based jobs or have side gigs that change up their income every month.

But you can—and should—budget every month, irregular income or not. It takes a little getting used to, but it isn’t hard if you follow these six steps.

one

1. List your income.

If you’ve got an irregular income, plan low. That’s right—you should set up your budget based on your lowest monthly income estimate.

It’s way better to start low than to start with an average. Why? Because if you budget low, you can always go up from there. But guessing high and having to back off later—that’s spells trouble. (Not literally, of course.)

To find your starting point, look back at some past pay stubs. What’s the lowest you’ve made in the last few months? Go with that.

If this is your first time working on commission or living on an irregular income, don’t worry! For now, estimate what your lowest month will look like. And put that in as your income.

Money

Start budgeting with EveryDollar today!

By the way, if you want to start off using pencil and paper, check out our Irregular Income Budget Planning form! It can really help to write out and see those numbers in black and white (or whatever color ink you use).

But then, we think you should upgrade your experience by downloading EveryDollar, our free budgeting app. Because listen, making—and keeping—a monthly budget is way easier with EveryDollar. Just saying.

step two

2. List your expenses.

Okay, once you’ve planned for all the money coming in, it’s time to prep for all the money going out. That’s right, it’s time to list your expenses.

Now, before you dive into the bills and everything else, set aside money for giving. We believe in giving 10% of your income to your church or a charity. And if you don’t have an emergency fund yet, make savings your next priority.

After that, focus on covering what we call the Four Walls: food, utilities, shelter and transportation. Then, budget for all your other monthly expenses. Start with the essentials, like insurance, debt and childcare.

Finally, give yourself a miscellaneous line and budget for nonessentials, like TV streaming services, restaurants, adult kickball league fees, subscription boxes and personal spending.

But remember—if you have an irregular income, you may not be able to enjoy certain extras every month.

For example, if you have a month of lower income, that might mean you have to cut spending in places like your entertainment category. Maybe this month, you’re renting a movie and getting frozen pizzas to eat at home instead of going out for dinner and a movie. (Which actually sounds really nice anyway.)

Hey, you have to cover your needs before your wants. Period. But you’ve got this.

Let’s recap the heavy hitter here: You might have to skip some of the extras (or plan low) at first. But if your income ends up higher than what you’ve planned—well, Step 5 covers that! But don’t skip ahead. Read it all!

step three

3. Subtract your expenses from your income.

This number should equal zero, which is why we call it zero-based budgeting.

Okay, make sure you understand that the zero here doesn’t mean you let your bank account reach zero. Ever. Leave a little buffer in there of about $100 to $300.

So, why zero? A zero-based budget is our absolute favorite budgeting method because it’s all about giving every dollar a job—whether that’s giving, saving, paying off debt, or spending. Every dollar that comes in has a purpose that you assign it! Because dollars without jobs get spent accidentally on impulse buys and mindless, daily coffee runs.

Remember, spending isn’t bad. But spending without purpose will keep your financial goals miles out of reach. Forever.

Let’s talk some logistics here, though. What if you subtract your expenses from your income and you’ve got money left over? Um, give yourself some high fives. (Is that just clapping?) And then put those dollars to work by putting any “extra” money toward your current money goal.

What if you end up with a negative number? This is actually pretty likely if you’ve got an irregular income. You’re budgeting low, remember? But it’s okay if your numbers are off. You just need to cut the extras (at least for now) until your income minus your expenses equals zero.

step four

4. Track your expenses (all month long).

Want to know what one of the biggest secrets to budgeting well is? We won’t hold back. Not even for a second. Here it is: Track. Your. Expenses.

What does that mean? When you spend money on something, you subtract that amount from its budget line. That way you always know how much money you have left to spend. And that keeps you from overspending.

When you make money, add that to your planned income for the month. This is incredibly important if you have an irregular income, because tracking your income will show you if you made as much as you planned or not.

And hopefully, you made more than you planned. Who doesn’t love it when that happens? We’ll talk in the next step about what to do when you have extra money to budget, but first we want to make sure we’ve covered all the bases about why you have to track expenses.

Budgeting is planning where your money will go. Tracking expenses shows you where the money did go. Tracking expenses holds you accountable—to yourself!

So track those expenses. Every single one.

step five

5. Make adjustments on payday.

The key to winning with budgeting on an irregular income is being flexible and staying on top of it. One of the ways you do that is by adjusting your budget as you get paid.

If your income ends up being higher than you planned, make sure you give yourself those awkward high fives we mentioned earlier. Then, add the extra income to your budget.

So, if you set your monthly income to $4,500 but actually made $5,000, go back and add that extra $500 in as income.

Then what?

Well, you still want a zero-based budget. And you had one, until that lovely extra $500 came in. (Nice problem to have, right?)

Time to put that money to work! You can add it to your current Baby Step (aka the proven plan to saving, paying off debt, and building wealth).

Also, you might go back to one of those extras you cut back on or skipped when you first made your budget and give it some financial love.

step six

6. Make a new budget (before the month begins).

Yay! You made a budget, and now you never have to make another one again, right?

Well, no. A budget isn’t a slow cooker. You don’t set it once and forget it. You’ve got to get in there and track those expenses. You’ve got to make adjustments along the way.

And you’ve got to make a new budget every single month! It’s more like a fantastic progressive dinner or five-course meal. It takes time and effort but is super worth it.

Your budget doesn’t change that much month to month—but it’s not ever 100% the same. So, copy over this month’s budget for the next, and then tweak as you need to. That means adding in month-specific expenses, like your BFF’s birthday or that oil change you need.

And always make your budget before the month begins so you’re ahead of your money, not lagging behind.

You Can Budget (and Do It Well!) With an Irregular Income

Remember, anything worth winning takes work. So, if you want to win with money—you’ll have to work at it. It usually takes around three months to get comfortable with budgeting, no matter your income. So, keep going. You really can do this.

But we’ll be honest: It’s way easier to budget well when you’ve got a budgeting tool. And it’s way, way easier when that tool is mobile and was created specifically to help you take on those Baby Steps.

That’s EveryDollar. Download it today so you can start budgeting better and crushing your money goals even quicker.

how to budget with an irregular income

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Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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