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How to Budget Irregular Income While Working in the Gig Economy

Kalen Bruce | March 20, 2017

The Gig Economy is fantastic for producing extra income, or providing your primary income.

But there is one downside (if you want to call it that): the income isn’t always consistent.

It comes with the territory. That’s ok though, because you can still budget and manage irregular income wisely, just like you can with a strict salary.

I’ll show you exactly how to do it.

Your Worst-Case Scenario

You’ve got to start by figuring out the least amount of money you could make. This is your worst-case scenario.

If you gig on the side, and have a traditional job, then your worst-case could mean $0 from gig work, leaving you only with your traditional income.

If you’re a full-time gig employee, your worst-case would be a little less than the least you’ve ever made in a single month.

Once you know what the worst possible situation is, you’re ready to plan your budget fund…

Your Budget Fund

A budget fund is similar to an emergency fund, but there is a good chance you’ll be accessing the money more than you would with a standard emergency fund. That means you need easier access than with an emergency fund.

We’ll go over more about what a budget fund is in a moment.

A standard savings account or money market fund may have penalties for making a certain amount of withdrawals. However, many money market and savings accounts have recently changed policies to allow as many as six withdrawals a month, which should be plenty.

Either way, you still want to save an emergency fund (3-6 months of living expenses), and put it in a savings or money market account. Your budget fund could be left in your checking account, as long as you know exactly how much is in it.

So what exactly is a budget fund? A budget fund is simply the amount of money you would need to bring your worst-case month up to speed. You saw your worst-case in the above section, and you know how much you pay out in bills each month. Split the difference.

So it’s kind of like a mini emergency fund.

The Specifics of Your Budget

If you’ve never made a budget, it’s actually really simple. You just track your spending for 30-60 days, and figure out how much you spend in the primary categories, such as:

  • Auto
  • Groceries
  • Eating Out
  • Entertainment
  • Luxury Habits (Smoking, alcohol, etc.)
  • Business
  • Clothing
  • And the list goes on…

Once you’ve tracked your spending for 30-60 days, you should know what categories you need, and approximately how much money you spend in each category.

The envelope budgeting system works well. You simply put the amount of each category in different envelopes. You can do this with cash and actual envelopes, or digitally with an app like Goodbudget.

After all your categories are created, then your budget fund really comes into play. You’ll pull from it to get any lacking category back up to the correct amount.

Irregular Income and Financial Goals

So many people think it’s impossible to stick to a budget with an irregular income.

That’s usually just an excuse.

If you have a good idea of what you typically earn and what you spend, it’s easy to budget an irregular income.

Your budget fund will be there to keep your categories funded.

As long as you can stick to your categories, you can achieve your financial goals.

To achieve saving, investing or debt goals, you just have to budget it.

Make a category to invest $100 a month, or pay extra on your debt. Even better, once you’ve accounted for your regular budget and funded it, use all the extra income you earn to go straight towards debt or investing goals.

The most popular reason to budget is to pay off debt, and if you have debt, that should be your first priority. There is no reason to invest and earn 6% while you are paying 18% on credit card debt. Of course, that’s just an example and everyone’s situation is different, but you get the idea.

Pay off your debt, and then work towards savings and investing goals, but get your budget fund and a small emergency fund in place before you start paying off your debt. This is a safeguard against the things that will start to happen when you start paying off debt. It seems like a law of the universe that when you start paying off debt, you will run into other financial issues. But if you’re prepared for them with the funds I mentioned, you’ll be set.

If you’re still not sure how to budget your income, there are plenty of resources online to help, including my free guide. But the most important part is simply knowing how much you earn and how much you spend.

Just because you have an irregular income that doesn’t mean you can’t have a solid budget. Budgeting always takes some trial and error. It may take a little more with a irregular income, but it can be done. Just start working on it and do it.

kalen bruce
Kalen Bruce is the founder of MoneyMiniBlog.com. He defies millennial laws by having no debt and four children.