Budgeting is difficultno matter what you make or how predictable your salary is.
If youre having trouble budgeting with an irregular paycheck, dont give up.
Here are five steps to budgeting if you have a variable income.
Frenck evens out her cash flow by depositing most of her $20 bills and using the others for petty cash. She also plans any trips or vacations for slow seasons, when she wouldn’t make as much working. Aileen Perilla/ The Penny Hoarder
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Even with an irregular income, there are only a few tweaks to the system.
If its significant, you could use that as your baseline.
This will be easier if youve been in your current position for over a year.
Calculate the difference between your monthly average and your expected income for every month.
Youll get either a positive or negative number.
Start with the last three months, then add annual or biannual expenses likeinsuranceand car registration.
List your sinking funds as well.
In addition to your income sinking fund, everyone needs an emergency fund for surprise expenses.
Other potential saving options include a medical fund, car fund, Christmas gift fund and pet fund.
Most of your monthly expenses will vary month to month, at least by a little bit.
you could average them the same way you average your income.
Sometimes, companies will do this for you.
When youre listing expenses, be as thorough as possible.
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Separate and Order Expenses Based on Importance
Once youve laid them all out, separate necessary and discretionary expenses.
Necessary means essential to surviving now or in the future.
Discretionary expenses are any additional expenses that enrich your life but arent necessary for survival.
After separating your expenses, its time to prioritize.
Aim for at least$1,000 in an emergency fund.
How much you save beyond that figure will depend on where you are financially and your personal preference.
Assign values to each saving category based on your spending toward your sinking fund and minimum debt payments.
So your savings might look something like this:
Thats typically the extent of necessary expenses.
Then it’s possible for you to prioritize all your discretionary expenses in the order you see fit.
Use the zero-based budgeting approach to ensure your priorities are funded, and give realistic values to everything else.
Heres how to do it.
Frenck deposits most of her $20 bills and uses the other bills for petty cash.
Its just one way she evens out her cash flow.
She also changes up how she spends her free time throughout the year.
Are you struggling to cope with financial stress?
First, take a deep breath.
Then, take a look at our roundup ofresources to help you manage your stress and your money.
Jen Smith is a former staff writer at The Penny Hoarder.
