Use Dave Ramsey’s 6-Step Budgeting Plan If You Have Irregular Income

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Financial experts across the spectrum recommend budgeting, asserting that it will help you build and maintain wealth no matter your income level. We hear a lot about putting bills on autopay, contributing to your 401(k) plan and doing the math to make sure our monthly spending doesn’t come anywhere close to exceeding our monthly earnings. What we hear too little about is how to budget when you’re not making a steady paycheck or have irregular income.

Acclaimed financial expert Dave Ramsey has a budgeting plan of attack, if you will, that helps. Ramsey’s team at Ramsey Solutions shared a six-step budgeting plan folks with irregular income can follow to get their finances in shape. Here’s what you should do.

Step 1: Go With Your Lowest Monthly Income

In the past 12 months, which month saw the lowest earnings for you? That’s the month you want to work with — even if you know you made an uncharacteristically low amount. 

“It’s way better to start low than to start with an average,” the Ramsey Solutions team wrote. “Why? Because if you budget low, you can always go up from there. But overestimating and then having to scale back later – that can put you in a real tight spot.”

Step 2: List All Your Expenses 

Your income may be erratic, but your bills, for the most part, are probably pretty regular. Write each of your monthly expenditures out. 

Start with “the four walls” — food, utilities, housing and transportation. Then move on to other essentials like child care or debt repayments. Finally, write down the nonessentials like subscription services or entertainment. During this step, you’ll get a good idea of whether any of this nonessential spending has to go. 

 Step 3: Zero It Out 

The Ramsey Solutions team recommends embracing a zero-based budget, where your income minus your expenses and savings cushion equals zero. The idea here is to assign every dollar you bring in a specific and important purpose. 

“When every dollar has a job, you’re less likely to make impulse purchases or accidentally overspend throughout the month,” the Ramsey Solutions team wrote. 

Step 4: Consistently Track Your Expenses 

You need to consistently track your expenses. Keep a log of all your spending in real time. When you make a purchase, regardless of what it is, subtract it from its designated line in your budget. 

“And the same goes for whenever you earn money,” the Ramsey Solutions team wrote. “Be sure to add it to your planned monthly income in your budget. This is especially important if you have an irregular income because it’ll show you exactly how much you’re making every month.”

Step 5: Adjust as Needed 

When your income is irregular, you need to always be paying attention to your budget and making adjustments as needed. This means accommodating for the months where you did particularly well. 

“For example, if you set your monthly income to $4,500 but actually made $5,000, go back and add that extra $500 into your budget as income,” the Ramsey Solutions team wrote. “And remember, you still want a zero-based budget. So, now you have to decide what to do with that extra $500 that came in.”

Step 6: Every Month, Begin Again 

When you’re budgeting with irregular income, you don’t have the luxury to work with the same budget throughout the year. You have to start anew every single month because next month won’t look exactly like last month. You could make hundreds more or hundreds less, depending on the nature of your work. 

“Copy over this month’s budget for next month’s, and then tweak as you need to,” the Ramsey Solutions team wrote. “And always make your budget before the month begins. That way, rather than feeling behind, you can actually get ahead of your money.”

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