Level 2: Budgeting Skills · 6 min
Budgeting on Irregular Income
Gig work, tips, commission, seasonal: a stable budget on unstable pay.
The rule that changes everything: budget on your FLOOR month, not your average. List the last six months of income; the second-lowest is your planning number. Everything above it is upside, with pre-decided jobs.
Pay yourself a salary: income lands in a holding account, and on the 1st you transfer your floor amount to checking. Fat months fill the holding buffer; thin months draw from it. The buffer, one month of expenses in the holding account, is the whole system's shock absorber.
Windfall months follow a written split (for example: 50% buffer/savings, 30% taxes if self-employed, 20% free). Deciding while calm beats deciding while flush. And if self-employed: quarterly estimated taxes are real; the IRS's own pages explain the schedule.
- Floor month
- A realistically low month used as the planning base.
- Holding account
- Where irregular income lands before your self-paid 'salary.'
- Estimated taxes
- Quarterly IRS payments self-employed people make in place of withholding.