5 money moves to make with an irregular income


Anna Baluch

Anna Baluch

Blog author Anna Baluch

Anna Baluch is a freelance personal finance writer who enjoys writing about personal finance topics including mortgages, retirement, insurance, and investing. Her work can be seen on LendingTree, Business Insider, Experian and other well-known publications. Anna lives in a suburb of Cleveland, Ohio and holds a bachelor’s degree in marketing. You can contact her on LinkedIn.

Published September 19, 2019|2 min read

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Most Americans have regular payments coming in every two weeks or so. They know exactly how much they’ll earn every month and can budget for their expenses and savings goals accordingly.

But what if you’re a contract employee, own your own business, or work in a commission-based job and don’t have a regular income? How can you stay ahead financially despite the ebbs and flows you may experience? Here are five key pieces of advice that can help you thrive with an irregular income.

1. Keep your expenses low

While it’s always wise to keep your expenses low, it’s particularly important if your income is unpredictable. Low expenses can give you the peace of mind of knowing you’ll be OK even when you don’t make as much as you expected.

To keep your expenses low, pay off debt, live below your means and shop around to make sure you’re getting the best prices for things like insurance and gas. (Learn how to switch your car insurance provider.)

2. Create a buffer fund

An emergency fund is money you set aside to help with an emergency such as a car repair or medical emergency. If you have an irregular income, it’s a good idea to keep a buffer fund in addition to an emergency fund.

So, what exactly is a buffer fund? When you don’t make as much as you normally do, you can turn to your buffer fund to cover your expenses. Any time you make more than you expected, stash some of your extra money into your buffer fund so it can help you out during months of lower income.

3. Design a budget & stick to it

As someone with an irregular income, designing a budget and sticking to it is vital. If you don’t, you may not have enough money for the things you need and the things that are most important to you. You may fall short on your mortgage or not be able to save for retirement or your child’s college. To create a budget with an irregular income, follow these steps:

  1. Determine your lowest expected monthly income.

  2. List your essential monthly expenses such as your mortgage, car payments and insurance.

  3. List your discretionary expenses for wants rather than needs. These may be for things like eating out, going on vacation or saving for retirement.

  4. Use the money from step one to pay for the essentials in step two.

  5. If you make above your expected monthly income, put the extra money in your buffer account or use it for the expenses you listed in step three.

Read our guide to budgeting for freelancers.

4. Be smart during good months

Some months, you may exceed your income goals and be tempted to live it up. While it’s OK to reward yourself with a new handbag or vacation every once in a while, doing so too often can leave you in financial hardship during months where you fall short on income.

Just because you did great one month, doesn’t guarantee you’ll earn similarly in the months ahead. It’s better to have the extra money you need when the going gets tough.

5. Stay on top of your tax situation

If you have an irregular income because you’re self employed or a contract employee, you’re on the hook for taxes. Here are some important tax tips to keep in mind:

  • Set aside 25% to 30% of your gross income for taxes.

  • Keep track of your business-related expenses so you can deduct them come tax time.

  • Pay quarterly taxes if necessary.

  • Work with a tax professional to avoid mistakes that could cost you a lot of money and headaches in the future.

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Image: H. Armstrong Roberts