If your income is inconsistent it can be really hard to budget. Here’s a couple of tricks to help you out based on my own experience dealing with uncertain cash flow.
Know your average pay
Rather than guess what you’ll earn, use what you earn on average. This keeps things real. Averaging also allows you to account for those pays that are unusually low or high. Use the last 3 pays to work our your average income, though a year’s worth more would be better.
Know your survivor budget
What’s a survivor budget? This covers those critical expenses that keep you functioning, like rent, power, groceries, transport and internet/phone.
I’d include debt repayments (loan and credit card) too because ignoring these carries a serious consequence. You don’t want to have a big black mark on your credit record.
If you know your survivor budget, you know the minimum you need to earn in order to keep the wolves at bay.
If you subtract your survivor budget from your average income, you’ll get immediate insight into the state of your finances.
Hopefully there’s money left over. This means you’re in a great position as you can think about allocating money to what’s important to you. May be it’s saving for something. May be it’s for getting rid of a debt. May be it’s just for going out now and then.
If there’s very little money left over – maybe even a deficit – then at least you know you should be taking remedial action. For example, identifying where you can cut your spend or changing how you manage debt repayments.
This kind of budgeting is by no means perfect. But I found I didn’t need perfect. I just needed to know how my average income stacked up against my survivor budget. This gave me actionable insight on what I need to do to gain control over my money.