Budgeting on a Variable Income

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Budgeting on a variable income can be difficult. If you are self-employed or you work on commission only, you may be faced with managing a variable income. This means that it can be difficult to predict how much money you will have coming in during a given month. If this is your reality, it is important to save a large percentage of your income on good months to help make up for the bad ones. Here is one way to budget your variable income.

List Your Monthly Expenses

First, you need to list all of your expenses the same way that you would with a normal budget. This allows you to see where your money needs to go. After you have listed all the expenses, add the ten percent you will put into savings to your total.

If you are self-employed you need to add in your taxes as an expense. You may want to have a separate savings account for taxes and one specifically for saving for months where you do not make as much money.


You will need to prioritize your expenses and take care of the basics first—this includes necessities such as food, shelter, electricity, and health insurance. After that, you should list your debt payments and savings contributions. Then you can add in expenses for clothing, gym memberships, and fun money. On the months where money is tight, knowing exactly where your money goes will help you budget if you need to cut back your spending on things that are not necessities, like entertainment and eating out. 

Save the Remaining Balance

Once you know how much money you will make in a specific month, sit down and subtract out your expenses. While you should always save ten percent, it is especially important for you and others on variable incomes to remember to save anything you make over the amount of your full budget. This should go into a savings account that is separate from your emergency fund and other savings goals. 

One exception to the savings rule is if you are working on getting out of debt. In this case, you may decide to put a percentage of up to fifty percent towards your debts with the extra money.

How to Cover Shortages

If you have a slow month, then you take the money out of the account that you have set up to cover slow months. These months you may want to scale back on unnecessary spending so that you do not drain your savings account completely. This will also give you more motivation to work harder so that you do not need to cut back. Generally, you should not be taking out money to cover fun expenses.

Find Ways to Supplement Your Income

It helps to have multiple income streams in place if you are working solely on commission. This can be done with a second job or by setting up a business that you do on your own at home. This can help you build up a big enough reserve that you do not need to continue with the second job or you may choose to take on seasonal work if you notice that your income drops during specific times during the year. 


  1. Once you have saved enough to cover two months worth of expenses, you may want to have your paychecks direct deposited into that savings account. Then you simply transfer the amount of your budget into your checking account at the beginning of the month. This helps you to continue to meet your expenses and save. When budgeting a commission only income, this can be especially helpful. Be sure that you always have at least two months income in this account once you reach this point, so you can adjust your spending as needed in case you have a few slow months in a row.
  2. It is important to make sure that you have a fairly tight budget the first few years that you are self-employed. You may not realize the first year or two that your work is seasonal or that it comes in cycles. It takes many businesses five years before they make a consistent profit. If you are coming up short every month, you may need to look for another source of income to supplement your business. You can create a solid financial plan to avoid an income crisis.