How to Budget with a Seasonal Income

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By cat804
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Budget with a Seasonal Income

Many professions, including freelancers, teachers, and adjusters have to deal with the irregularities of seasonal income. This article will give you some advice to help you budget when you're not sure what payday's going to look like.

Difficulty: Moderate

Instructions

Step 1

Determine whether your income is seasonal or irregular.

If your have irregular income, for example, you're a freelancer who has good and bad months, budget based on the month you had the lowest income. For example, your yearly income might be $48,000, giving you a monthly average of $4,000. But if you base your budget on a $4,000 income, how do you deal with months where your income is $2,000? If you base your income on the $2,000 month, your budget will be safe in case of a dry spell where you have several low-earning months in a row. In high earning months, you can put the excess into savings or an emergency fund.

If you have truly seasonal income- for example, if you only work in the winter, put everything over what it costs you to pay your bills and expenses into savings while you're working. When the season's over, divide by the number of months until next season. There's your monthly budget for the next year. Remember, you don't have to spend all the money each month. The more frugally you live and the more you keep in savings, the longer you can go if your industry takes a turn and your seasonal income if affected.
Step 2

Determine how you spend your money and group your spending into categories. For example, look at your last month's bank statement and determine how much you spent on gas, groceries, entertainment, clothing, diapers, etc.
Step 3

Add an item in your budget for taxes! If you're not a W2 employee, your company probably doesn't deduct taxes. To get ready for tax season, estimate your yearly taxes, divide by how many pay periods you have in a year, and set up an automatic transfer to a savings account for that amount on payday (you can also do this monthly). You don't want to owe Uncle Sam money you don't have, especially if your irregular income or seasonal income is low that time of year!
Step 4

Once you have a list of categories, figure out what you usually spend and what you want to spend in each category. Use either your lowest earning month or your monthly average as a maximum.
Step 5

Put your budget in a spreadsheet. Have a column for category, one for budgeted amount, one for actual amount, and one for the difference.
Step 6

Buy what you need, pay your bills, and put the extra money into savings for a slow month. Live by your budget!
Step 7

Halfway through the month, plug your actual spending into your budget to see if you're on track. If you're not, determine whether you need to modify your budget or your spending.
Step 8

Do the same thing at the end of the month. Make any changes you need to, and keep living by your budget. Put away any leftover money for a slow time.