How to plan when you have irregular income

Respect to all the freelancers, DIYers, and people out there without a steady paycheck.

Also, your life is, shall we say, more complicated.

With irregular income comes anxiety. How much will you make this month? Will it be more or less than last month? It’s not as easy as just getting a paycheck.

But it is workable. You can still make a financial plan and stick to it. Here are some ways you can make it happen, and thrive.

Assume the worst (but in a good way)

They say that past performance is no guarantee of future results, but you can probably figure out the worst month you’ve had.

Let’s say that the least you made recently was $2,000. Some months you made upward of $6,000.

Then make your plan assuming you’ll make the least amount you made, in this case, $2,000. Your bills and expenses must add up to that.

Should you find you make more, you can adjust your plan, or just put that extra income into savings.

Now, this plan requires that your leanest month be one you can actually live on. If the worst month you had was $0, this isn’t a good plan.

But this way, you can be reasonably sure of being able to make your plan work.

Assume an average

Another way you can do it involves working with an average monthly income, somewhere in between least and most earned.

In the above example, if you make between $2,000 and $6,000, say you plan for $4,000.

This requires a little extra planning, and you’ll need to have money socked away to cover any lean months. That month you make $2,000, you’ll need to take out $2,000 in savings to be able to cover your costs.

But presumably, if you average correctly, the next month where you make $6,000 will offset this.

How to handle bills

Depending on how variable your income is, some months might be pretty lean. And that might affect how you pay your bills.

Some bills need to be paid the same no matter what. Your electric bill is your electric bill, right?

But what if you have a credit card bill or a mortgage? You may want to tackle them differently depending on the month, paying more some months than others.

So you make a priority list, with the minimums and non-negotiables at the top. From there, if you have extra income that comes in, you can move on to the nice-to-haves, such as paying more on your credit card bill, mortgage, or even putting money in to savings.

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You have to cover the basics first. Yes, I want you to pay off your credit card bill as fast as possible, but not at the risk of running out of money for everything else you need to do in a month.

It can be done

An irregular income can make life a little more challenging, but that doesn’t mean that you can’t still work a successful financial plan.

You just need to make things as regular and dependable as possible, given the limitations of your current situation. This can help you weather the ups and downs of forging your own career path. It’s worth it.

If you want some help figuring this out for your specific situation, let me know.

How do you handle an irregular income? I’d love to hear about it in the comments below.

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