4 strategies to build the best budget on a part-time income


Paul Sisolak

Paul Sisolak

Blog author Paul Sisolak

As a personal finance journalist, Paul specializes in financial literacy, loans, credit scoring and the art of negotiation. He's covered some of the nation's most inspiring financial success stories for national publications including CNN, and US News & World Report and has a passion for helping Americans overcome their debt.

Published February 2, 2017|6 min read

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Budgeting tends go to something like this:With a full-time job, you fit your expenses into your income and have a solid understanding of what you can and can’t afford on your regular paychecks. With a part-time job or irregular income, it’s a matter of fitting your earnings into your expenses.Budgeting your money on an irregular income can be a challenge when it seems like you don’t have enough income to budget in the first place, or on certain months, your bills exceed the amount of money you’re earning.But that’s precisely the reason why having a budget -- and making every dollar count -- is so important if your income fluctuates (like in working freelance or sales), or if you’re job searching and aren’t up to full-time status yet.Even when you think your income is stable, it’s wise to have a budget in place for the unexpected. A job loss or a layoff, or, as we’ve seen in the news, potential changes in Visa status for expatriates living in the U.S., could leave hard-working people out of employment with no financial buffer in place.Here’s how to make the most out of managing your money:

Prioritize your monthly expenses

How much money do you have going out? Whether you work full-time, part-time, or not at all, one thing is for sure -- you’re going to have bills to pay and expenses to meet. Some may revolve from week to week and month to month, and others may be fixed.Your revolving expenses are variable. Those are expenses you incur a few times a month that vary in cost, like gas for your car, groceries, utilities, or discretionary purchases, like eating out or entertainment. Depending on what you purchase and how much you charge, your credit card can also be a revolving expense.Fixed expenses are static from month to month. You can expect your rent or mortgage payment, car payment, life insurance premiums, and student loans, or other costs, like an internet, cable, gym membership or a Netflix subscription, to generally stay the same amount each month (barring a rise in insurance rates, rent, etc.).Tally up your monthly expenses and prioritize which ones are most important. Naturally, paying for a roof over your head and putting food on the table are the necessities that should take precedence. If you’re a freelancer or contractor, don’t forget to take into account taxes -- not just during tax season, but anytime during the year. And what about saving? Is there a minimal amount -- say 5 percent -- of your income you’d want to put in a deposit account?Financial expert Dave Ramsey believes in prioritizing the "Four Walls": Food, shelter, clothing and transportation.List your expenses in order of non-negotiable to negligible; which budget-busting ones can you part ways with to save money, at least until you reach full-time status? Something as simple as skipping Starbucks, canceling your cable or finding affordable/free ways to have fun or exercise can free up more money in your budget than you may think.Continue to look for ways to slash your higher expenses. Can you take on a roommate to split the rent? Downsize to more affordable accommodations? Revise your errands route or job commute to reduce your transportation/fuel costs?To make organizing your expenses easier, use anything from an Excel spreadsheet to one of many budgeting apps for your smartphone; You Need a Budget and Mint are great places to start.

Determine your minimum income

Likewise, how much money do you have coming in? For many part-timers, no two paychecks may be the same. How long have you been working part-time? If it’s been a year, six months, or even just two months, examine how much you earned in each of those months.Take your lowest-earning month and make that your baseline income to budget from. Compare it to the expenses you’ve tallied up; by now, you’ll have prioritized your monthly bills and looked at ways to reduce or eliminate spending in some areas (even if it’s just temporarily).Remember, it doesn’t matter if the number of better-paying months outnumber the lower periods; when you’re on a fixed or irregular income, the point is to budget conservatively, so using your minimum income allows you to live within your means. If your expenses fall within your minimum income with money to spare, you’re doing a good job, since it gives you the flexibility to save or spend more for the months when you do earn more than your minimum.

Create a two-budget system

Now, sticking to one budget and one baseline income is a good way to start, but we’d like to see you take it a step further by devising two budgets:

  • One budget for more prosperous, better earning times

  • One budget for lesser earning, learner months

The basic budget you’ve built should count as your "lean" budget, which maxes out the amount you’re allowed to spend each month based on your average minimum earnings. So how do you build the higher budget?One approach is to set a spending limit based on the maximum you’ve earned in the last year, and only use that budget when you earn the same amount or more going forward. Otherwise, rely only on your original minimum income budget at all other times. Why would you want this additional higher budget? It’s one way to prevent yourself from feeling deprived all the time of being able to spend more freely once in awhile; plus, it can be a good motivator to earn some extra money and open up your budget a bit more generously.When working with the two-budget system (or one-budget system, for that matter), always take into account unexpected or irregular expenses that might find their way into your budget, like an emergency repair bill or medical expense. This form from Dave Ramsey can help you get started.

Maximize your earning opportunities

A fixed income never has to stay fixed, nor does an irregular income have to become regular for your finances. Always seeking out new ways to earn money -- even if you remain within the part-time spectrum -- provides more opportunities to expand and change your budget to suit your evolving income and needs.If your position is tip- or commission-based, talk to your boss about scheduling you during peak hours to raise your potential earnings. Can you take on a side hustle or a second freelance job to earn more money? Two or more smaller jobs can end up comparing to a full-time job’s earnings, only you’re not locked into one employer, giving you more freedom to maximize how much you work if your primary employer has you on a set schedule.Once you begin to create new opportunities to earn more money, or to obtain a full-time role, the budget you’ve built begins to come together and make more sense. Whether your income is variable or fixed, your budget should always be changing to meet your needs, adapt to your goals, and grow to include your best earning potential.