Five Ways To Budget For Irregular Income

If you are self-employed with no specific idea of the amount of income to expect in a month, it might be difficult to have an accurate budget.  Nevertheless, the following tips would help you to manage the irregular income.  

Build up an emergency fund

If you have a good month, or a month when your outgoings are less than expected, avoid the temptation to just spend the extra cash. Try to build up an emergency fund to cover unexpected costs and get you through times when your income might be lower. Understand that having a month’s income saved will give you a cushion to protect you against immediate income shocks

Think ahead

It’s important to factor in seasonal changes in income, particularly if you’re self-employed. In some industries, Christmas is a good period. While in others, the holidays are a slow time, with little income coming in.

You also need to be aware of times when your outgoings will be higher. For example, around Christmas, or in months when there are birthdays or annual bills due, such as car insurance.

Budget for your lowest monthly income

If you have irregular income, it can be tempting to budget as if every month will be a good month. But this can leave you short if you have a bad month.

The best way out is to budget for your lowest monthly income, at least you’ll always have the major costs covered.

Make sure you can cover regular bills

When you’ve worked out how much you have going out, you need to be sure you can cover these costs every month. If not, you can easily be charged for going into your overdraft, or face getting into debt.

If you’re worried about dipping into money earmarked for these bills, you might want to set up a separate account for your regular outgoings. You can then use it to top up in a higher-income month. This way, you’ll always know the money is there to cover essential expenses.

Budget for outgoings

You might not know how much you have coming in every month, but you should have a good idea about how much is going out , and this is a good  beginning for you.

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