In March you bring home $3,800. In April it's $2,200, and the rent is the same both months.
That's what an irregular income looks like: your pay changes from month to month, which happens if you freelance, drive for a gig app, earn commission or work by the season. Uneven pay makes budgeting harder because a regular budget assumes the same paycheck every two weeks.
The fix for uneven pay is to plan on a low month instead of a good one. Build your budget on March and April comes up $1,600 short, but build it on $2,200 and March leaves you $1,600 to hold for the next slow month.
Below are six steps to build a budget around your lowest month, plus a six-month example of a $2,200 plan with every number shown. Once your plan is set up, join our free investor livestream on November 17, where CEO Jaspreet Singh shows how to use ChatGPT and Claude to research stocks like a pro.
Step 1: Add Up What You Earned
First, find out how much your take-home pay has moved around. List what you brought home each month for the last six to twelve months.
If you don't have monthly records, Consumer.gov suggests adding up last year's income and dividing by 12. And if no one takes tax out of your pay, count only what's left after you set tax money aside, which Step 6 covers.
Step 2: Pick a Number for Budgeting With Irregular Income
Next, pick one monthly income number to build your budget on. Penn State Extension gives two ways to choose it: your lowest month of the last six, or your six-month average.
The Nebraska Department of Banking and Finance says to plan on your lowest steady month, or a cautious estimate of it, rather than your highest or average month. Planning on the average is risky because it leaves you short in any month that comes in below it.
In the six-month example near the end of this guide, the average is about $2,983. Planning on that would leave a $783 hole in the $2,200 month.
Step 3: Split That Number With 75/15/10
With your number picked, split it the way the Climb to Wealth class teaches. The 75/15/10 split puts at most 75 percent toward lifestyle, at least 15 percent invested and at least 10 percent saved.
With uneven pay, you apply it to the low month you plan on, not to every dollar that comes in. Investing involves risk including loss, and past performance does not indicate future results.
Your must-pay bills, like rent, utilities, insurance and minimum debt payments, have to fit inside the 75 percent of that low month. If your must-pay bills don't fit, lower them first, and our guide on how to lower your monthly bills has a call script that can help.
Step 4: Pay Yourself a Steady Amount
Once your bills fit inside your low-month plan, the next step is paying yourself the same amount every month, even when your income changes. Nebraska's guide uses two accounts: every dollar you earn lands in the first one, and once or twice a month you move a set "salary" from it into the account you spend from.
You get the same deposit on the same days, whether the month brought in $2,200 or $3,800. That fixed transfer is a steady paycheck you set yourself, and it's also the "automate it" step of the Climb to Wealth class.
Step 5: What to Do in a Good Month
Good months are your chance to save for slow ones. Keep the extra in the first account until it holds one month of your planned pay, so a slow month can still cover your salary.
Nebraska says money from a high-earning month should go to this buffer first, beginning with a single month of bare-bones costs. Penn State also suggests using money from higher-income weeks as a buffer.
The example below fills the buffer with a full month of planned pay, which covers more than bare-bones costs. After the buffer is full, extra money follows the order the class teaches: save your first $2,000, pay off credit card debt in the right order, then automate it so you're not relying on willpower.
Step 6: Set Aside Tax if No One Withholds It
Part of every month's pay belongs to taxes if you work for yourself, since there's no employer taking tax out for you. The IRS says people who expect to owe $1,000 or more when they file generally have to make estimated tax payments.
The IRS splits the year into four payment periods, each with its own due date. How much to set aside depends on your own taxes, so use the IRS page or a tax professional to find your number.
An Irregular Income Budget, Worked Out
Here's how the six steps work over six months: a $2,200 plan fills a full month of cushion by month three and sends $2,500 more to the class order, enough to reach the first $2,000 in month six.
Here are six months of take-home pay, after tax money is set aside:
| Month | Take-home pay | Paid to yourself | Extra above the plan |
|---|---|---|---|
| 1 | $3,100 | $2,200 | $900 |
| 2 | $2,400 | $2,200 | $200 |
| 3 | $3,800 | $2,200 | $1,600 |
| 4 | $2,200 | $2,200 | $0 |
| 5 | $3,500 | $2,200 | $1,300 |
| 6 | $2,900 | $2,200 | $700 |
| Total | $17,900 | $13,200 | $4,700 |
The lowest month is $2,200, so that's the plan. With 75/15/10, that's at most $1,650 for lifestyle, at least $330 invested and at least $220 saved, and the must-pay bills have to fit inside the $1,650.
Over the six months, $4,700 came in above the plan. Here's where the $4,700 goes, first to the cushion and then to the class order, starting with the first $2,000:
| Use of the $4,700 extra | Amount | When |
|---|---|---|
| Cushion in the first account (one month of planned pay) | $2,200 | Full in month three |
| Next goal in the class order, starting with the first $2,000 | $2,500 | Months three, five and six |
The example starts with nothing in the cushion and takes nothing out of it. Every number here is an example, not a target.
Will Budgeting Work With an Irregular Income?
Yes, when the plan starts from a low month and good months refill the buffer. Planning on a low month and refilling the buffer is the approach both Nebraska's banking department and Penn State Extension describe.
A one-month buffer has limits. Two months with no income in a row would still empty a one-month buffer and leave the second month uncovered.
Costs That Don't Come Every Month
One more kind of bill can throw off a low-month plan: bills that come once or twice a year, like car insurance, which can come due in a low month. Split each one into a monthly amount and keep it inside the 75 percent, the same way you'd budget for rent.
Steady Pay From Uneven Months
- Add up six to twelve months of take-home pay and plan on a low month, not the average.
- Split that number with 75/15/10 and pay yourself a fixed amount from a holding account.
- Fill a one-month cushion in good months, set tax money aside and send the rest through the class order.
Pull up your last six months of deposits, circle the lowest one and set your salary transfer to that number. The one-month cushion covers the next slow month, so it doesn't turn into an emergency.
If your side income and commission pay leave room to invest, join our free investor livestream on November 17, where CEO Jaspreet Singh will show how to read the economy and research stocks with ChatGPT and Claude.
