Handling Budgeting With Irregular Income
By the Pachyy Editorial Team The Pachyy Editorial Team comprises a diverse and experienced team of writers, researchers and subject matter experts whose aim is to provide you with useful insights, guidance and commentary on all matters related to your personal finances.
It can be frustrating to find yourself in a situation where it’s the 20th of the month, and there’s less than $100 in the bank. Even though you have a few shifts scheduled for next week, your paycheck won’t come until the first day of next month. Despite budgeting and sticking to your spending goal, there still isn’t enough money. So, what might have gone wrong? Budgeting with irregular income is not an easy task, but it is definitely possible! When it comes to budgeting, there are two main components to consider: money out (spending) and money in (income). Even if you manage to stick to your target for spending, you might still run out of funds if your projected income was incorrect or insufficient. Working hourly jobs can make budgeting challenging. It can be difficult to predict how many shifts you’ll work in a month or how much you’ll earn during those shifts. However, it’s important to remember that budgeting with irregular income is not impossible. It just requires more effort to create an accurate budget when your income varies unpredictably. This is where Pachyy comes in! We’re here to provide you with helpful tips on how to build a useful budget even when your income varies from month to month!Creating a Budget for Low-income and Minimal Spending
Hey there! Let’s start by determining the lowest amount of money you might earn in a month, which we’ll refer to as your “income floor”. Wondering how to estimate your income floor? Take a look at your past paychecks at your current pay rate. Find the lowest amount you’ve brought home in a month so far, and use that as a starting point for estimating your income floor. It’s important to consider the reasons behind lower earnings in a particular month. Did you miss work due to illness or take an unpaid vacation? If there were any circumstances preventing you from working, you can adjust your income floor accordingly. The idea is to estimate the minimum amount you’d bring home during a “normal month”. Based on your income floor estimate, we can now create a low-income, low-spend budget. If you’re new to budgeting or need a refresher, check out our budgeting tips for beginners. If your income ends up being equal to your income floor, there might not be much room in your budget for entertainment or unnecessary purchases. Unfortunately, you’ll have to cut those items from your low-income, low-spend budget. Take a look at our article on wants vs needs for guidance on determining what’s essential and what can be eliminated. Your budget may not turn out exactly the way you want it, and that’s okay! Now is the time to think about how you could bridge the gap between your income floor and spending needs. Are there family or friends you could borrow money from instantly? Is there another source of income you could tap into? If your income floor leaves a budget gap, it’s a good idea to set aside funds during the months when you earn more, so you can cover that gap in the future. Budgeting on a low or irregular income is definitely possible but will require some effort. Don’t worry, though – you’ve got this!Creating a Usual-income Budget
Instead of only planning for the worst-case scenario, let’s consider the income you typically bring home each month. Take a closer look at your current pay rate and try to estimate your usual income. Finding your typical income can be a little challenging. It usually falls between your highest and lowest earning months. Can you identify a range of amounts that appear repeatedly? That can be a good starting point. If you’re having trouble pinpointing your usual income, you can calculate the average monthly income over the past year and use that as your estimate.What to do with Two Budgets?
Now that you have two budgets, let’s figure out how to use them effectively! At the beginning of the month, it can be difficult to estimate your income, so it’s wise to stick to your low-income, low-spend budget. After a week or two, you’ll have a better idea of your total income for the month. At that point, you can consider transitioning to your typical-income budget. By using both a low-income/low-spend budget and a typical-income budget, you can determine which one suits you better. Being flexible allows you to adapt your budgets to your needs. Don’t let irregular income stop you from achieving financial wellness!If you’d like more information on personal finance tips, budgeting, or loans for individuals with bad credit, feel free to explore the rest of the Pachyy Dojo website!