How to Budget With Variable Income

Having multiple streams of income can make a seamless budget feel unreachable. Income may be sporadic and variable, but fear not! This post is dedicated to taming that beast and making life just a little more simple.

About half of my income comes from 2 part time jobs, and the other half comes from contract work. When filling out taxes for 2018, I counted 14 sources of income. With all of this fluctuating income, and some entities paying me twice a month, budgeting can be a little different.

When dealing with variable income and paydates, I have found planning my money to be a two-fold process. The first part is the “hustle” in making sure my schedule is full. The second part is budgeting the money and being sure when I get paid, my bills get paid.

The Hustle

A key part of me being able to budget in any form with a bananas pay schedule is knowing how much I need to make. The starting place for any budget-making process includes listing all monthly bills with amounts and due dates.

Step One: Divide bills up into essential bills, and non-essentials goals. 

Essential bills are the things that must get paid or there will be some consequence (i.e. my lights will be turned off). I choose to include my monthly savings amount in my essential bills list, because paying myself first is essential (future me is worth it, after all).

Non-essential goals include things like debt repayment and my semi-monthly trips to visit my nephew. I will not be evicted if I can’t go down to the coast very often. It’s a priority to me, so I plan accordingly, but it’s not required for my survival. 

After I have my list(s) I total the amounts and come up with two numbers: my Barebones number (all the essentials), and my Target number (everything I want). My goal is to make the Target amount per month, but if I just make enough to cover my Barebones number, I know I will be fine. 

Step Two: The Monthly Target amount is divided by 4 (for the average 4 weeks in the month).

Now I know how much I need to make per week. This is the number I choose to attach myself to. I’ve even divided it further (by 5—for the 5 business days in the week) to find the amount on average I should be shooting to make per day. However, for me, the weekly number suffices. 

Step Three: Fill my weekly schedule with work that will total the Target Weekly amount.

If I hit my weekly goal, I know I will hit my monthly goal. I can then be confident I’ll make enough money to pay my Barebones Monthly amount (all my essential bills) and ideally my Target Monthly amount (all my goals). 

Having a weekly Target amount helps me discern if I need to take additional gigs that aren’t my favorite assignments, or are at odd hours. Having a Barebones number helps me recognize if I need time off, or Self-Care time, financially I will be just fine.

Image of a weekly planner with a week’s view. Includes various appointments with the amounts earned per appointment. Also includes a list in the corner with the total for the week per paying Entity.
Using a Weekly Calendar, I track my earnings*

Knowing whether or not I’ve made enough money for the week aids me in practicing good judgement and avoid overworking myself. It has taken some time, but thankfully I have built up my business, and work for several entities. I typically am able to fill my schedule and reach my Target amount. 

With the “hustle” and schedule in place, I am sure to take care of the back end piece of my business. I send invoices every week (sometimes at the close of business the same day the job was completed) to make sure there are no delays in getting paid. This is a habit I’ve embraced, and in my field it’s just a good business practice. Some prefer to invoice every month—whatever works for you and your profession. 

The Budget 

Once upon a time, I had a traditional job, and fell into relying on a biweekly paycheck. I enjoyed that consistency, so that is how I approach my current budget system. One of the entities I work for regularly pays every other Friday so I chose that “payday” to work around. I have chosen my Personal Payday to align with a consistent check I receive, but arbitrary dates like the 1st and the 15th work just fine.

Personal Paydays

I list all of my anticipated “paydays” from each entity and split them between my Personal Paydays. For example, if I know Entity A pays me on the 1st of every month, Entity B pays on the 5th, and Entity C pays on the 7th, I will lump them together and use it toward a Personal Payday that hypothetically is on the 8th. Any paid invoices I receive after the 8th will be lumped together and I will “receive” these amounts on my next Personal Payday (say the 22nd). Anyone who pays me on the 15th, or 20th of the month, will be lumped together for the 2nd Personal Payday of the month. 

A list of random Paydays with amounts earned, and then totals for each Personal Payday.

02/27 ABC Inc. (Jan) $450
03/01 XYZ  Corp (02/03-02/16) $1253 (after tax $939.75)
03/05 CRP (02/16-02/28) $613.42 (after tax $460.06)

Payday: 03/08 = $1849

03/12 Imaginary (Feb) $742—401K
03/15 XYZ (02/17-03/02) $1352
03/20 GWS Job (03/01-03/15) $296—Tax Fund
03/21 Random (Feb) $578

Payday 03/22 = $1930
Random Paydays are categorized into Personal Paydays*
Bills

Separately I have a chart which organizes my bills by amount and due date. I chart and assign bills using my Personal Paydays. This ensures no bills are paid late or fall through the cracks. Whether it is a paper chart, or a spreadsheet on the computer, the idea is the same.

A chart/spreadsheet with bills listed at the top, and dates listed in the margin, with amounts in the corresponding boxes showing what bill is due when.
Any chart that helps divvy up what bill is due which Personal Payday will work!*

Set it and forget it 

I get the hustle down, and schedule myself accordingly to make the money I need to make. I then divvy up that money into 2 self-set Personal Paydays that I use to lump income together to make it manageable. I use my Bills chart to help me determine which bills are paid with which Personal Payday. 

It requires minimal effort to set this system up. This is how I am able to operate my business, and my household economics so efficiently. I do not work in the finance field, so small business practices initially were not my realm of expertise, despite being a small business owner. This process has been cultivated through trial and error, but once this system has been set in place, it’s quite effortless. 

Other Considerations

Taxes: Certain income is earmarked for my quarterly income taxes because I am technically self-employed. I have found it easiest to delegate 1-2 entities that I work for regularly to be my “tax” money. I do not include those amounts in my Personal Payday. Instead, when I am paid, I immediately move the money into my Tax Fund (a separate savings account) until I reach the amount due for that quarter’s taxes. I follow my accountant’s advice as to how much I need to pay in quarterly taxes. 

Retirement: For retirement contributions, the approach is the same as my Tax Fund. A few sources of income which are reliable are earmarked for my solo 401k. As I do not receive benefits from an employer, I have set up a solo 401k through my LLC. Only money paid to my LLC (meaning my 1099 income) is allowed to go toward my 401k, and I reserve paychecks from certain entities for this purpose. I do not account for them in my Personal Paydays. I happen to have a solo 401k, but this approach would work for anyone, even if there is no LLC. The retirement vehicle instead of a solo 401k could always be an IRA account (which anyone can open).

Vacations: The nice thing about knowing how much money I need to make per week is the ease in planning for vacations. I can save and budget for an upcoming vacation, and also know how much money I need to save to offset the missed work. If I plan to take a week off, I know I need a certain amount saved in advance to offset the loss of earned income that week. This way, I can take a vacation, have money saved to serve as my Paid Time Off (since I don’t have PTO through an employer), and not scramble when I get back to make up the money I didn’t earn while off.

A list of Paydays, paying entities, amounts due to be paid, a Personal Payday lumping the amounts, and a list of that pay cycle’s bills due. 

02/27 ABC Inc. (Jan) $450
03/01 XYZ  Corp (02/03-02/16) $1253 (after tax $939.75)
03/05 CRP (02/16-02/28) $613.42 (after tax $460.06)

Payday: 03/08 = $1849

03/08 Need $964 ($1849)
-375 groceries
-150 Allowance/Gas
-100 Synchrony (Savings)
-75 Husband new work shoes
-14 Netflix
-250 House Fund
= $885—Student Loan

03/12 Imaginary (Feb) $742—401K
03/15 XYZ (02/17-03/02) $1352
03/20 GWS Job (03/01-03/15) $296—Tax Fund
03/21 Random (Feb) $578

Payday 03/22 = $1930
Add the bills due via your chart for that Personal Payday and you’re set!*

Taking care of your money is taking care of yourself

This is one approach to budgeting with variable income. I’m sure there are a ton of self-employed people who find themselves in a similar situation. Just like with any of my writings, there is no one right way to operate your personal finances.

I have found a sense of peace in operating my business in a way where I am able to spend 1-2 hours a week doing invoices, scheduling, and budgeting. It frees up my time to perform the service I am being paid for, and to enjoy my free time. Managing my money so it is not a point of stress in my life, is absolutely a form of self-care!

*I chose to do a mock-up of numbers and bills with all the images shown, rather than show actual images from my personal budget. The field I work in has a Code of Ethics regarding the work we take, and I did not want to reveal anything, including who I’ve worked for, to protect the privacy of my clients.

This post may contain affiliate links, and this blog could earn a small commission if the affiliate links are used. I would never link to a product or service that I have not used myself.

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