Every Thursday in 2025, I will be answering questions about money and/or budgeting. If you’d like me to answer your question in an upcoming post, please submit it here.
Today’s question is about how to budget when your income is unstable:
“I work as an assistant at a school, so my income is never stable. I don’t get paid during holidays, school breaks, or summer vacations. How do I budget when my income is unstable? – Anita
This is a great question – and one I hear a lot. I find a lot of people think budgeting only works if you have a steady paycheck, the same amount every week or every other week.
Our income has been unstable
Let me encourage you: We never had a steady income. When we first got married, I worked as a waitress and Jesse worked part-time. I never know how much I will work, how many customers will come in, and what kind of tips they will leave. Over the next few years, Jesse would be in law school and we tried to save every penny we could, so we lived with as little as possible and saved the rest. Budget is key to achieving this goal.
After Jesse started law school, we worked a few different jobs over the years—all part-time, almost all with varying hours and opportunities. During this time I also started some online businesses and started learning how to make money from blogging. Some months we make more, some months much less. We’ve been barely making ends meet for months, but we’re still sticking to a budget.
Fast forward a few years later and our income still varies significantly as MoneySavingMom.com is now our full-time income. We work with many different brands and companies and sometimes there are many opportunities and other times there are far fewer. We generally know which months throughout the year the temperatures will be cooler, but there are usually some surprises and things we thought we would do well that didn’t work out. Likewise, budgeting allows us to experience the ups and downs and fluctuations of running our own businesses in the ever-changing age of the online world.
How do you stick to a budget when your income changes?
In 22 years of marriage, how do we stick to a budget through so many different jobs, income changes, turmoil, and lack of steady income? Here’s what worked for us, and I highly recommend this if you’re on an irregular income:
1. Create a budget based on minimum monthly income
The basic principle of managing income inconsistencies is to budget based on the minimum income you expect each month. Start by looking at your past paychecks and identify the months in which you earned the least. This is the number you will use as your baseline. If your minimum monthly income is $1,500, build your budget around that amount.
This ensures that your essential expenses like rent or mortgage, utilities, groceries, and transportation are always covered. Treat any income above that baseline as a bonus and use it strategically (we’ll talk more about this later!).
If your income sometimes doesn’t make any money at all in a month (for example, if you work in a commission-only job or, like Anita, you don’t make any money during the summer or vacation), I suggest you take a look at your past overall situation over several years. How much money have you made in a year over the past few years? Can you make the same money next year?
Take that number and reduce it by 20-30% and divide by 12. (The reason I have you cut back 20-30% is because I want you to plan for less than what you think you will actually make. This way, it provides immediate wiggle room and less stress. Also, I think not planning will make Spend every penny you get on basic expenses, which is a valuable practice.
2. Consult your budget, not your checking account
Change the way you think about the money in your accounts as “money you can spend” and instead look at your budget to see how much you actually need to spend in each account. The transformation here could change your life! (Need help creating a budget? Download our Free Money Tracking Worksheet!
If this is difficult for you, when your paycheck is deposited into your account, don’t deposit it into your main checking account. Instead, deposit it into a separate holding account or “income account.” From there, transfer only the amount you need to pay for that month’s budget. This creates a sense of consistency even if your income fluctuates.
This system allows you to think of your income in terms of your monthly budget rather than your personal salary. It can also help you avoid the temptation to spend any extra money impulsively.
3. Make short-term sacrifices to build an emergency fund
When your income is unstable, one of the best things you can do for yourself is to create a cushion. Start with a goal of saving money for a month. Once you reach that goal, set three-month and six-month goals.
This emergency fund can provide you with a safety net for a few months when your income is low or unexpected expenses pop up. To build this fund, use any extra income from your high-earning months and put it into a high-yield savings account. Think of it like a bill. Pay your emergency fund bill first.
Yes, that may mean working on a very, very tight budget for six months or even a few years to allow for wiggle room to save money. Think of this as a short-term sacrifice that will lead to long-term benefits.
To create breathing room in your budget to save for your emergency fund, look at your current budget and ask: “Is there anything here that I can live without/need/give up in a short period of time?” Ask friends and mentors to take a look your budget and help you identify areas where you can reduce. Sometimes, a fresh outside perspective can provide a new perspective.
If you really can’t cut anything, then I encourage you to think about what you can do in the next 6 months to a year to earn some income. Can you work overtime or do a small part-time job in the afternoons and evenings? How about asking your friends or colleagues if they have any projects or small jobs you can do for them to make extra money? Other ideas: pet sitting, nannying, tutoring, dog walking, contract work on Uber, Doordash, Upwork or Fiverr, selling on Facebook Marketplace or working as a virtual assistant.
(Note: in one hour budgetI have a bonus with 50 ways to increase your income.
4. Create a sinking fund for predictable expenses
A sinking fund is a savings account used to pay for predictable but sporadic expenses, such as car repairs, holiday gifts, or back-to-school shopping. By setting aside a small amount each month to cover these expenses, you’ll avoid the stress of scrambling to pay them when they arise.
For example, if you know you need $600 to buy holiday gifts, start saving $50 a month in January. When December rolls around, you’ve already set aside funds without having to use a regular budget or use a credit card.
I outline exactly how to do this in my article How to Budget for Variable Expenses .
5. Use “extras” wisely
During your higher-earning months, you may be tempted to splurge or upgrade your lifestyle. Instead, use the extra income to strengthen your financial foundation. Some smart ways to use extra funds include:
- Build or replenish your emergency fund
- pay off debt
- Contribute to long-term savings goals, such as retirement or a down payment on a home
- Increase exhausted budget categories
At the end of the year, take stock of the extra income you have left and decide how to allocate it toward your financial goals. Whether it’s saving, investing, or giving your family something special, make sure it aligns with your priorities.
(Need help determining your financial priorities? Download my Free Budget Goal Planning Worksheets Printable Pack. This free printable pack is designed to help you dream about your financial goals, walking you through the steps to turn those dreams into realistic goals, then breaking them down into monthly chunks.
6. Practice gratitude and contentment
Finally, remember that managing money is as much about mindset as it is about numbers. Focus on what you have and what you can do, not what you don’t or can’t do. Celebrate small wins, like saving $25 or sticking to a budget for a month.
When you approach your finances with gratitude and contentment, you’ll find that managing an unstable income becomes less stressful and more empowering.
You can do this!
Living on an inconsistent income may require extra effort and planning, but it’s definitely doable. By creating a budget based on your minimum income, spending based on the budget rather than the amount in your checking account, building a strong emergency fund, and using your extra income strategically, you can create a system that works for you. Over time, these habits will give you greater financial security and the freedom to enjoy life—even during the school holidays!
PS Need some step-by-step help creating a budget? Check out my brand new resource: The One Hour Budget. Simple and effective guide will walk you through the process of creating a realistic budget in just 60 minutes!
Want to make progress on your financial goals but don’t know where to start?
With these Free Budget Goal Planning Worksheetyou’ll start with the all-important goal setting and then have space to track your steps!
