Budgeting tips for irregular income

Your financial life doesn’t have to be unpredictable just because of your income. Here’s how to adjust your budget to accommodate fluctuations in income.

• Determine your financial baseline

Budgeting is all about knowing how much you have to work with. Look back over the last 12 - 18 months: what was the lowest monthly income you received? Base your budget on your lowest monthly income estimate (the bare bones).

Knowing the minimum amount that will get you through the month by covering all your expenses will help you prioritise your spending and focus your financial decision-making.

• Create a budget

Basing your budget on the least amount will help keep you within a margin of safety. Once you’ve determined your minimum income amount, you can run through not only your expenses but also what you’d like to achieve. As with any budget, your baseline (or bare bones) budget should help you do the following:

• Create limits on your spending
• Create emergency savings
• Put money away towards your financial goals  
• Help with debt repayment
• Pursue investments and retirement provision

The good news is that if you earn more than your baseline in a month, you can put more money towards these categories. Why not use our Budget Manager add-on to track your spend in relation to your budget?

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• Build a buffer for the low months

Have a specific amount in an account that acts as reserve funds. This will give you a windfall and the flexibility to cover additional expenses in the low(er)-earning months. Your buffer amount isn’t an emergency amount; it’s meant to act as supplementary funding to give you some breathing room and security.

A PureSave Account makes it easy to transact and create a savings buffer at the same time.

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• Create a financial plan for your goals

Working for yourself gives you a certain amount of freedom and control, so it makes sense that within that environment, your money does the same. To make your money work for you, you need to have a plan for it.

If you base your budget on a specific amount and you earn more than that, what will you do with it? If you don’t put it towards a goal, you run the risk of spending it. Having a plan acts as a roadmap to guide your spending and savings decisions.

Map out a clear path for your money to help you achieve your financial aspirations despite your unpredictable cash flow or fluctuating income streams:

• Forecast your income and expenses based on past trends and project pipelines.  
• Establish a realistic budget that prioritises essential needs and savings goals.  
• Build an emergency fund to navigate lean periods. This plan acts as a roadmap, guiding spending and saving decisions to ensure financial stability and progress towards long-term goals, even with fluctuating income streams.

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_{Disclaimer: This article is solely intended for information. It does not constitute financial, tax or investment advice or recommendation. Please speak to a financial advisor or registered financial professional before making any financial decision(s).}

_{Standard Bank, its subsidiaries or holding company, or any subsidiary of the holding company and all of its subsidiaries make no warranties or representations (implied or otherwise) as to the accuracy, completeness or fitness for purpose of the information provided in this article or that it is free from errors or omissions.}