How to manage irregular income: 5 simple steps to budgeting success

Irregular income refers to salaries that vary from paycheck to paycheck or month to month. Managing irregular income is possible if people review their finances, establish functional budgets, and assess their performance regularly.

Budgeting with an irregular income, also called a variable income, can present unique challenges. This article explores practical strategies to help individuals budget effectively and manage their finances even when income isn’t predictable.

Here are a few steps to take to keep finances on track.

Table of contents

  • Review and understand income patterns
  • Determine typical monthly income
  • Build a functional budget
  • Create an emergency fund
  • Review the budget regularly
  • Irregular income examples
  • Managing an irregular income is possible with PayPal
  • Frequently asked questions

1. Review and understand income patterns

The first step for people with an irregular income should be to assess whether there’s an income pattern. Keeping a record of all sources of income, how and when they were earned, is essential to gain a clear financial picture.

Tracking savings and spending 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.

2. Determine typical monthly income

Once people understand their income patterns, they can use that information to establish an irregular income budgeting strategies for families or individuals that helps them keep their finances on track.

However, since variable income isn’t predictable, figuring out how much money each person has to work with can be tough. Here are a few methods to consider using when calculating typical income for a new budget:

  • Calculate average monthly income: Determine the average monthly income by totaling earnings over a specific period—such as six months or a year—and then dividing by the number of months. This approach provides a more stable figure to base the budget on and gives people a baseline for their budgets.
  • Use the lowest income month total: Identify the lowest income month over a specific period and use that figure to plan the budget. This method ensures that individuals can cover essential expenses even during lean months.

3. Build a functional budget

Budgeting with an irregular income can be more difficult than it is for individuals with consistent income. However, because income varies from month to month, setting a clear budget can help people better maintain their financial well-being.

Start by prioritizing fixed monthly expenses from different budget categories. These are expenses that people must pay for in full each month to ensure they have the bare minimum to live comfortably. This includes common household expenses like:

  • Rent
  • Mortgage payments
  • Utilities
  • Groceries and food
  • Insurance
  • Savings
  • Loan payments
  • Revolving credit payments

Once individuals account for those expenses out of their average monthly income or lowest-month income, they can allocate the amount left over to other expenses. This may include costs for:

  • Entertainment
  • Clothing and footwear
  • Gym memberships
  • Streaming services

Keep in mind that budgets are not set in stone. People with variable incomes may want to use their budget as a general guide rather than a hard and fast rule.

4. Create an emergency fund

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:

  • Financial stability: A maintained emergency fund helps cover essential expenses during periods of low income or unexpected financial hardship.
  • Lower stress: Knowing that there is a financial cushion available can reduce stress and anxiety about finances.
  • Higher returns:  Savings account interest rates or annual percentage yields (APY) are often competitive. Each contribution to the account earns interest automatically as long as the money stays in the account.

To create an emergency fund with unpredictable income, people should set up regular contributions from their preferred checking account.

Here are some strategies to consider:

  • Set aside a portion of every paycheck: Allocate a percentage of each paycheck to the emergency fund. This consistent approach, even if it's a small amount, can accumulate over time.
  • Save windfalls from high-earning months: During months with higher-than-average earnings, set aside a larger portion for the emergency fund to potentially boost savings more quickly.

5. Review the budget regularly

When people earn irregular incomes, their budgets can change more often. Try to review the budget at least once a pay period to make sure it accounts for all necessary expenses. Some people may find it useful to create a bi-weekly budget so they can adjust their spending more quickly.

If income only slightly varies each month, individuals may want to reevaluate their budget every month or two.

Any leftover money can go toward savings goals or similar expenses based on individual preferences.

If income is lower than anticipated that month, the person may need to cut back on additional spending or reduce the amount they contribute to savings to cover necessities.

Irregular income examples

Irregular income jobs come in various forms, each with its own unique characteristics. From making money at home to seasonal roles, here are a few examples of irregular income, the types of industries where it’s most common, and who tends to earn variable income:

  • Freelance work: This includes a multitude of jobs such as writing, graphic design, management, consulting, and many others. Income can vary significantly based on the number and type of projects completed each month.
  • Project-based work: Workers in fields like construction, event planning, or software development may receive payment upon the completion of specific projects. For instance, a contractor might be paid after finishing a home renovation.
  • Seasonal jobs: These are jobs that are tied to specific seasons, such as retail work during holidays, lifeguarding in the summer, or agricultural work during harvest times. A holiday retail worker might see high earnings in December but much lower income in the off-season.
  • Commission-based jobs: Sales roles often rely on commissions, which can fluctuate based on performance and market conditions. For example, a real estate agent's income can vary greatly depending on the number of homes sold.
  • Gig economy jobs: Income from platforms such as food delivery apps, personal transportation apps, or other gig-based work can be inconsistent, as it depends on the number of jobs completed and demand in the area.

Managing an irregular income is possible with PayPal

Budgeting with an irregular income can be challenging. But with the right strategies and tools, long-term financial stability is possible. By creating a comprehensive money management plan and sticking to a budget, people can reach their financial goals more easily and reduce the risk of spending more than they should.

However, the key to thriving with an irregular income lies in saving up to cover those unexpected lower-income months.

Start saving with PayPal Savings to access competitive annual percentage yields that can help grow savings fast.1

Frequently asked questions

Here are a few frequently asked questions about irregular income.

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