How to budget with irregular income: a baseline, a buffer and one daily number

When your income changes from month to month, budget on a baseline, not on what you hope to earn. Average your take-home over the last three to six months and plan on about 75% of it. Every payment goes into a separate holding account, and once a month you pay yourself the baseline as a fixed "salary". Fixed costs and savings come out of that salary first; what is left becomes a daily spending number. In a good month the extra stays in the holding account. In a bad month the holding account pays your salary anyway. To check the daily figure for your own numbers, use the daily budget calculator.

Why is budgeting on irregular income hard?

Standard budgeting advice starts from "your monthly income", as if it were one number. For freelancers, gig workers, people on commission and seasonal workers, it isn't. Two things vary: how much comes in, and when it arrives. One invoice paid three weeks late can turn a good month into a tight one.

The usual trap is spending like the good months. A $5,000 month feels like the new normal, spending rises to match, and the next $1,500 month lands on a budget that can't absorb it. The fix is to separate earning from spending: income goes into one place, and you pay yourself a steady amount out of it.

How do I work out a baseline income?

1. List your take-home income for the last 3 to 6 months. Count money on the date it reached your account, not the date you invoiced. Use what is left after platform fees and, if no tax is taken out of your payments, after the share you put aside for tax. A tax office or accountant can tell you how much.
2. Take the average. Add the months and divide by how many there are. Six months smooths out more; three months reacts faster when your work changes.
3. Plan on a conservative share of it. 75% of the average is a sensible starting point. It leaves room for a weak month without making the budget too tight.

If you have no buffer yet, or your income has been falling, look at the lowest month in the period and use it when it is lower than 75% of the average. With less than three months of history, count only work that is confirmed.

My Money's budget assessment uses the same rule: when you choose irregular income, it budgets on 75% of the recent average.

Where should the money go when it arrives?

Open a separate account (a basic savings account is enough) and send every payment there: client invoices, platform payouts, commission, cash jobs. This is your holding account, sometimes called a buffer. Your everyday account receives only one thing: your salary.

• Start with a cushion if you can. One month of salary in the holding account before you begin means a slow first month doesn't break the system.
• Set a target size. One to three months of salary. The bigger your swings, the bigger the target.
• Sweep the excess. When the account ends a month above target, move the extra to savings or a goal. Otherwise it quietly becomes a second spending account.

How do I pay myself a fixed salary?

Pick a day, such as the 1st, and move the baseline from the holding account to your everyday account every month, whatever you earned. Like a paycheck, the amount doesn't change because a client paid early or late. Then budget it like any regular income:

1. Fixed costs first. Rent, utilities, phone, internet, insurance, loan payments, subscriptions and a monthly share of annual costs. These are due however the month goes.
2. Savings next. A fixed amount, even a small one. Extra money from good months reaches savings through the sweep, so this amount can stay modest.
3. What's left is spending money. Divide it by 30 for a daily number. The daily budget method explains carry-over and what belongs in the daily number.

A daily figure such as $30 stays the same whether a client paid on the 2nd or the 28th, and it shows your pace while the month is still happening.

Worked example: six months of freelance income

All figures are examples, not typical earnings.

Income ranged from $1,500 to $5,300, yet the salary never changed, and neither did the $30 a day. February and May fell short of the salary by $600 and $900; the holding account covered both. April and June pushed it past the $4,800 target, so $1,900 and $500 went to savings.

The check: $2,400 at the start + $19,200 in − $14,400 in salary − $2,400 swept = $4,800 at the end. Add the $200 a month saved from the salary ($1,200) and six months produced $3,600 of savings, while the cushion doubled. Income averaged $3,200 again, so at the next review the baseline stays at $2,400.

What should I do in a bad month?

• Keep paying the salary from the holding account. That is what it is for.
• If the account can't cover it, pay yourself less and pause savings first. In the example, a $2,200 salary with savings paused still leaves $900, so the daily number stays at $30. A $1,900 salary with savings paused leaves $600, and the daily number drops to $20.
• Adjust early. If a payment slips mid-month, divide the spending money left by the days left, counting today.
• Don't fill the gap with a credit card. Borrowing to keep the daily number unchanged pushes the problem into next month, often with interest.
• Chase what you're owed. Sometimes a bad month is only a late month. Follow up on unpaid invoices before cutting deeper.
• Review the baseline every three months, using the latest months. If weak months keep coming, lower the salary before the holding account runs dry.

Does this work for gig, commission and seasonal income?

Yes. Only the way you find the baseline changes, and students with a part-time job can use it too.

The student budget guide works through an example with part-time pay.

How does My Money handle irregular income?

My Money is a free iPhone app that turns a monthly budget into one number: how much you can still spend today. It suits the salary approach, because the daily number comes from a steady monthly amount, not from what arrived this week.

• Two ways to set up. Enter a monthly spending amount directly ($900 in the example), or take the budget assessment and choose irregular income: My Money budgets on 75% of the recent average, subtracts fixed costs, everyday living costs and your savings goal, and offers plans such as Saver (save about 30% of income), Balanced (about 20%) and Flexible (about 10%). The daily reference is roughly the pocket money left ÷ 30. It all runs on the phone with fixed rules, not AI.
• Carry-over. Spend less than the daily amount and the difference carries into the following days; spend more and the coming days get less. Carry-over is capped at five days' worth.
• Re-assess when income changes. You can change the plan or redo the assessment any time in Settings, which fits a three-month review.
• Logging income. Income can be logged, and logged income offsets spending. If your budget already comes from a fixed salary, logging each client payment as income would count that money twice, so keep those payments in your holding-account records.