A friend wrote me this email wondering how I budget on an irregular income. I have some suggestions, but before I write them up on here, I wanted to throw the question out and see what people think. How do you budget for irregular income (e.g., if you’re a student, consultant, etc)?
How do you budget when you have a highly variable and semi- unpredictable income over time, due to significant amounts of contracting, short-term (summer) gigs, etc.?
My stipend is $x/month, but I not-infrequently make 1.5x, 2x, or 3x, often just for a week or a month, or for the summer, and even my stipend varies (by 50%) from year to year due to different combinations of support/fellowships. In short, I make “enough” money, but how/where/when is totally up in the air.
I get by without trying primarily because I’m frugal and focussed in my spending, and all my income goes directly into savings from which I mostly deduct fixed amounts monthly…
But it’s at best semi-planned and I still don’t always feel in control, particularly under extended periods of heavy deadlines and such when my ability to manage my life goes out the window, I totally lose touch with Quicken, and my spending even seems to increase due to much larger amounts of restaurant food (OMG NO TIME FOR GROCERIES!!1!).
The core problem is this: though my net savings cashflow is almost universally positive, I still pay major/one-time expenses directly out of savings (since that’s where all money goes aside from monthly rent, DRIP deposits, etc. that gets auto-deducted). In short, I’m half-way organized and the other half is just riding on the fact that I’m *generally* frugal and “relatively* well-off.
This is hard with such variable income since my innate pattern- matching skills no longer apply (“my savings is only up $2000 this month, something must be off or I must have spent too much” makes no sense when my savings should go up anywhere from $1000 to $7000, mid- month or any other time, depending which way the wind blew last Tuesday).
What do you suggest for budgeting on an irregular income?