How Do You Budget With Fluctuating Income?

The steadiness of a salary or predictable paycheck is nice, but how do you budget with a fluctuating income? I received the question below from a friend of ours awhile back and wanted to share my answers in case anyone else is going through the same scenario. Cathy showed us true Texas hospitality back in August when we spoke at the Texas Style Council. She picked us up from the airport and saved us some buckaroos. Thanks again Cathy! She runs her own social media business, check her out if you are in need of some social awesomeness.

From Cathy:

Hello from Austin! I hope you and Kelsey and Rooney are doing well :)

I really hope you don't mind me emailing, but since you were the catalyst that got me into budgeting, I wanted to let you know I completed my first month of tracking....... and boy, was it eye opening. I spent the first evening just crying over the fact that I spend so much money on junk. Well I managed to pull myself together and create my first budget. I've pulled out cash for food and misc. and set up my spreadsheet so I can track what's going where. I'm nervous but excited! Oh, and my boyfriend is my accountability partner. He's been so supportive through this :)

Quick question though; what do you suggest when it comes to budgeting with a fluctuating income? Since I work for myself, I have a "base" amount I get a month (client contracts that are the same every month) and then 2 clients that pay hourly as well as random consulting jobs. I'm sort of at a loss as to how to budget my extra income.

Thanks again for all your help. I swear, between you and Kelsey's great marriage advice and your financial planning, The Williams family is quickly becoming my own personal Oprah :)

Take care and lots of love and blessings to your family!

Reply from me (Eric):

Hey Cathy!

Thanks so much for the email! I'm so excited for you to get into budgeting! Although I have zero experience with fluctuating income budgeting, I'll share some basic principles that I've heard over the years.

  1. Keep track of your total income from month to month: As time goes on, you'll be able to see trends of high months/low months and be able to come up with spending trends to mirror that.
  2. Priorities: You'll need to know which items on your budget are a priority and try to live on the the bare minimum and view any extra income that comes in as gravy.
  3. Set Goals and Milestones: It kind of sounds like you have enough predictable income month to month to get by, and then you're not sure what to do with the extra? (good problem to have in your case) This is where having a goal can help keep you motivated and from spending just because the money is there. You can use this extra money to save up for the low times, to pay off debts, save for retirement, save up for Christmas gifts, other gifts, a big piece of furniture you want to buy? Obviously you'll want to look at the priorities of all of those options.

For us, there are a handful of things that we save for every year: Christmas gifts, general gifts, vacation, Rooney's birthday, Iowa State Fair. So at the beginning of the year, we budget the total for those things, then try to save monthly for them. But, if we get our tax refund, or a bonus at work, then we try to save up for them completely, which frees up money on a monthly basis. Then when we have extra money throughout the year, we'll save for something we want. (needs vs. wants). The want right now for us is finishing our basement.

Let me know if you have any more questions.


Do you have fluctuating income? How do you handle your budget with that in mind? What tips/tricks do you have?

P.S. If you have a specific question of your own, We're just an email away! eric[at]wordsofwilliams[dot]com.