How to Budget on Variable Income

It’s a perfect day, you’re sitting at a coffee shop under a crisp blue sky and feeling hugged by the warmth of the sun. You wish your finances would feel as worry-free as the embrace of this radiant moment, but since your income fluctuates week-to-week or even month-to-month, you find it difficult to stay on top of everything. 

In many industries, variable income is a common occurrence. You could be in the hospitality industry earning tips as your primary source of income or in real estate earning commission. Having variable income that is either inconsistent in payment amount or inconsistent in when you’re paid requires a system and planning ahead. 

Let’s start with the basics on how to best budget with this type of income:

  1. First, make a list of your fixed expenses. These are expenses that you have no choice but to pay every month or are recurring expenses that happen on a regular schedule. Think rent, utilities, Spotify or Netflix.

    1. You want to make sure you’re writing down each fixed expense along with the amount and date it is taken out of your account. 

    2. Also, keep track of those quarterly, semi-annual, and annual expenses. Think car insurance or haircuts as an example.

  2. Now, you want to reflect on how often you typically get paid. Is it weekly, every two-weeks, every month, maybe it’s quarterly?

  3. Once you have the cadence of when you’re paid, you should now think about the most conservative and reliable income amount you will receive as payment. This is your baseline income and the point from which you’ll begin to budget. Let’s use an example:

    1. Jane works at a restaurant Thursday through Tuesday and gets paid every Friday. Some weeks she could make as much as $1,400 after taxes, but some weeks she could make as little as $600. In this case, we want Jane to assume she only makes $600 per week and see if her expenses can fit in that budget on a weekly basis. This is why knowing what date your fixed expenses come out is important.

    2. If Jane has been working at the restaurant for a numbers of months, she could also add up each of her paychecks and then divide it by the number of paychecks she counted. This will give her the average weekly income she earned. Let’s say in this case it’s $867.35 per week. Then, Jane will round down and budget as if she was earning $850 per week.

  4. If there’s money left over, use it to budget for your savings goals and variable spending. Variable spending is for those expenses that change all the time. Great examples of this are groceries, dining out, and shopping.

No matter the job or industry you’re in, if you have variable income, you need to make sure that your expenses are within the lowest consistent amount of money you could be earning, then plan to save the rest and keep yourself on a variable budget that makes sense for your lifestyle. Just because you have variable income doesn’t mean you can’t make a consistent plan that provides some certainty. This will allow you to stay ahead in your cash flow, which is very important — especially when unexpected expenses come up!

Check out our B.F.F. approved budgeting tools if you’re ready to start budgeting that variable income.

How to Budget on Variable Income is written by Kadri Augustin, Certified Financial Trainer for

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