How to Budget on a Variable Income

As of October 2019, over 15 million Americans are self-employed while many others work off commission only.

If you’ve always had a steady paycheck but now you’re suddenly trying to pay the bills on a variable income you may be worried about how to make it all work.

Don’t be.

Fortunately, it’s not hard to budget for an irregular income, it just takes a bit of creativity and planning. Here’s how:

What’s your bottom line?

What’s the minimum you need to survive as you are right now?

Sit down and write out what you need to pay each month; electric, phone/internet, childcare, groceries, gas for your vehicle, insurances, etc.

This is the number you’ll be focused on when it comes time to pay bills, buy groceries, put gas in your car and spend on your son’s birthday party.

Three basic types of expenses

Make it simple. Think about the kinds of expenses you have when creating your budget as a guideline to make sure you account for everything.


These are those expenses that remain the same each month, such as your rent or mortgage and car payment.

Obviously, you know your fixed expenses, but it can be a little harder deciding how much you’ll need to set aside for your fluctuating ones such as utility bills.


To come up with a realistic amount, use the highest bill you’ve ever had as your baseline number when doing this bare-bones budget.

Remember to include long term savings, investments and debt repayments in your budget…while they don’t keep you alive now, they are still important to your future.


A form of fluctuating spending, these are those little foxes that tend to creep into our spending such as stops for coffee (when we could have brewed a pot at home) or that yummy chocolate bar at the checkout counter.

Remember that discretionary expenses are just that…discretionary, so use wisely. Bottom line if you have the money available that doesn’t mean you need to spend it. 

If you don’t have the money available then don’t rob from the other categories just because you want something.

Note: This category of spending is arguably the hardest to control because it’s so closely tied to our emotions! 

Build up your emergency fund

While it can be hard to build an emergency fund when your income isn’t regular, it’s key to creating a good, workable budget.

Your emergency fund will make those inevitable dry spells much less daunting when you need to pay your rent immediately.

One way to do this is to routinely put a percentage or specific amount of money aside with each paycheck (or invoice paid).

Get a nice tax refund?

Don’t blow it…put it in your rainy-day fund instead.

Your savings will be there in the event your income takes a dive so the more you can build it up, the better it will be for you later.

Paying bills

Put exactly how much you need to spend into your bank account to cover the bills plus some discretionary to cover any possible shortages.

As you go through the month paying each of your bills, mark them off as they’re done.

Covering shortages

Slow month?

Simply use the money you’ve set aside to cover the bills. Don’t feel guilty doing this…it’s what the money is for. Just pay what needs to be paid, still put money aside and then move forward.

If you’re finding that you’re consistently coming up short take a closer look to see what needs adjusting; your income (in which case get more or better-paying clients – or make more sales).

Alternatively, or in addition to more income, change your spending by eliminating unnecessary expenditures or frivolous spending.

Generally speaking, if you’re using your emergency fund money as ‘fun’ money, it’s time to rethink your budget and priorities.

Take a salary

Finally, one strategy to use if you’re self-employed is to take a salary.

Put your business income into a separate business account, then pay yourself a salary (your baseline budget) out of that account.

What you’re doing in this situation, in essence, is creating your own steady paycheck.