Budgeting and Additional Income

Hey there! Budgeting your money can feel overwhelming, but it doesn’t have to be. This article will walk you through some practical tips for budgeting, even when your income fluctuates or you have multiple income streams.

Calculate Your Total Income

The first step is to calculate your total monthly income. This includes income from your job(s), side hustles, investment dividends, child support payments, etc. Tally up all sources of income so you know how much is coming in each month.

If your income changes a lot month-to-month, you may want to calculate your income over a longer period, like the past 12 months. Then take the total and divide by 12 to get your average monthly income.

Pick a Budgeting Method

There are a few main methods for budgeting:

• 50/30/20 budget: This splits your income into 50% for necessities, 30% for wants, and 20% for savings/debt.
• Zero-based budget: Budget every dollar so your income – expenses = 0.
• Reverse budget: Save first, spend what’s left over.

The 50/30/20 budget is a simple framework for beginners. But with an irregular income, a zero-based or reverse budget may work better since they’re more flexible.

Prioritize Necessary Expenses

Before budgeting for wants, make sure you’ve allocated enough for needs like:

• Housing
• Utilities
• Groceries
• Transportation
• Insurance
• Minimum debt payments

Pay these bills first so you don’t fall behind. Having some cash reserves or an emergency fund can also help cover essential costs if money gets tight one month.

Automate Your Savings

One of the best things you can do is automate your savings so the money gets pulled from your account before you can spend it. Here are some options:

• Set up automatic transfers to a savings account.
• Enroll in your employer’s retirement plan.
• Split direct deposits so a portion goes to savings.

Aim to save at least 10-15% of your income. More is even better! This money can act as your safety net when income dips.

Use a Budgeting App or Spreadsheet

Technology can make budgeting a lot easier. Apps like Mint, YNAB, and EveryDollar connect to your accounts to track spending. Or you can use a simple spreadsheet.

The key is to log all income and expenses, so you know where your money is going. This makes it easier to spot areas to cut back when needed.

Build Your Emergency Fund

Having cash reserves is crucial when your income fluctuates. Experts recommend saving 3-6 months of living expenses. But even $500-1000 to start can help cover gaps or surprise expenses.

Contribute any extra income to your emergency fund first before spending it. That way, you’ll be prepared for slower months.

Look for Ways to Supplement Your Income

Additional income streams can help balance out the ups and downs. Things like:

• Freelance work
• Driving for a rideshare service
• Renting out a room
• Selling handmade crafts online

Even an extra $200-500 a month from a side gig can make a big difference. And you get the flexibility to work extra during slow times.

Reduce Fixed Costs

The more wiggle room you have in your budget, the easier it is to manage fluctuating income. Look for ways to cut back on fixed costs like:

• Downsize housing
• Lower your car payment
• Negotiate/lower your insurance rates
• Call service providers to get a better rate

Every dollar you can trim from your fixed expenses is one less dollar you have to worry about each month.

Build Up Savings in Good Months

When you have a really good month for income, avoid the urge to splurge. Instead, take that surplus money and stash it away in savings.

That way, when an inevitable slow month comes along, you’ve got a cushion to supplement the lower income without going into debt.

Get Creative with Side Hustles

Side hustles are a great way to generate extra cash on your own schedule. Get creative with skills you can market, like:

• Photography
• Writing/editing
• Web design
• Music lessons
• Crafting
• Consulting

Tap into your unique talents and interests to find fun ways to make extra money. The income from side gigs can give your budget a helpful boost.

Reassess and Adjust

Check in on your budget periodically to see what’s working and what’s not. You may need to shift money around or try new strategies. Budgeting is an ongoing process!

The key is learning how to make the most of both the high income periods and the lows. With some planning and discipline, you can manage your money effectively even when your earnings rise and fall.

What budgeting tips have worked for you? Share your thoughts in the comments!

References

• Your Guide to How to Budget Money – NerdWallet
• How to Create a Budget When Your Income Fluctuates | Comerica
• How to Budget With a Fluctuating Income – NerdWallet
• 4 tricks for budgeting on a fluctuating income – Discover
• How to Budget When You Have an Irregular Income | Capital One
• How to Budget on a Fluctuating Income – SoFi