Variable income refers to income that fluctuates from month to month and can be challenging to budget for, manage and forecast. This type of income is common for people who are self-employed, work on commission, or have variable work hours. Despite the challenges that variable income poses, it can also have its benefits.
Variable income can provide more opportunities for earning a higher income and allows people to have more control over their income. However, the unpredictability of variable income can make it difficult to budget, save, and plan for long-term financial goals. Learning to budget with a variable income requires a different approach to budgeting and managing finances, which can be challenging for some people, but with a good plan and tracking expenses can be managed.
A budget with a variable income? Here are a few strategies you can use to make it work
- Create a basic budget: Start by listing your fixed expenses (e.g. rent, utilities, insurance) and your variable expenses (e.g. food, transportation, entertainment). Estimate how much you’ll need to cover these expenses each month, and use that as your starting point for budgeting.
- Build in a buffer: Since your income is variable, it’s important to have a cushion in case of lean months. Consider setting aside a portion of your income each month for unexpected expenses, or build in a buffer of at least 20% of your income.
- Prioritize spending: When your income is variable, it’s important to prioritize your spending. Make sure you’re allocating enough money to cover your essential expenses, like rent and food, before spending money on non-essential items.
- Track your expenses: Keep track of your spending each month, so you can see where your money is going. This will help you identify areas where you may be able to cut back, or where you might need to allocate more money.
- Be flexible: Expect that your budget will change from month to month. Be ready to adjust your budget as your income changes, and be prepared to make trade-offs when necessary.
- Consider side hustles: With variable income, it can be helpful to have a side hustle or a gig that you can do when you need more money. This can be a great way to supplement your income and help you weather lean months.
Overall, budgeting with variable income requires some flexibility and the ability to adapt to changing circumstances, but it can be done. With good planning and tracking, you should be able to manage your finances and make the most of your income.
