How to Make a Variable Income Budget Work!

Sep 25, 2020 | Budgeting Tips, Finances

Trying to stick to a budget when your income is inconsistent can feel like you are paddling up a river with a pool noodle. These budget strategies and tips will give you the tools you need to budget like a pro… Even on a variable income!

Woan's hand pulling dollar bills out of a wallet, from Fun Cheap or Free!

Sticking to your budget makes you feel like a million bucks (pun intended). There is a definite satisfaction when you stay under budget and are able to stash extra money in savings or apply it towards your debt. When you spend time creating a budget and find yourself blowing through your spending limits, however, the opposite happens. It is frustrating and you may want to give it up altogether! 

*Note: When you click the links in this post, we may receive a commission at no extra cost to you.

A variable income (aka when each month’s incoming cash flow looks different), makes staying on a budget seem like an impossible task. You might be thinking, “No one told me life was going to be this way! My job’s a joke, I’m broke, my love life’s DOA!” But guess what, friends, “I'll be there for yoooooou!” And here we are! Let’s tackle variable income budgeting together and then go cry about how we can’t watch Friends reruns on Netflix anymore, ‘mkay?


Closeup of a woman's hand pulling out dollar bills from a wallet, from Fun Cheap or Free

The crazy capitalization in INcome is no mistake. When we talk income ‘round these parts, we mean the literal take-home pay that is deposited IN your account each month. Dividing your salary by 12 will make your budget numbers whacky because (sadly) that is not how much money you actually bring home. If you have a variable income that includes tips or commissions that don’t necessarily look the same every month (or week!), how do we come up with an accurate income for a budget?

Establish a 6-month average when working with a variable income. For six months, track every penny you bring home (which may include actual cash from tips). Take this tracking very seriously because you will be basing your budget off of this information.

Once you have a total for six months, divide this number by six to get the average monthly income, which will be the base of your budget. Some months you will make more than this number (hooray!), and some months you will make less (ACK!), but this average income number will help you create a more realistic and doable budget.

Pro Tip: Depositing cash, tips, and commissions straight into your savings account will help you track your income more accurately. 

Be aware of your low season and high season with a variable income

If your industry has a low season and a high season, be sure to take this into consideration when determining your average. You don’t want to track and average from your high season and feel defeated each month when the low season swings back around.

If you're doing your income tracking during high season, go lower than your calculated average to determine a more “normal” income number. Just like planning for a party, having “leftovers” is much more preferable than running out of food! 

Pro Tip: If you are new to your industry, and have no idea about low season or high season, don’t be afraid to ask a colleague what their experience has been!

Create a budget

Create a budget based around your income, using our envelope budget! Tips from Fun Cheap or Free

Next up is creating a budget around your income. If you aren’t sure where to start, you’ve come to the right place, friend! (Is it too soon to sing the theme song again?!) We have a practical and simple budgeting system that not only helped our family get out of debt but has also helped thousands of people as well!  

The basics are to set THREE budgets:

  • Grocery Expenses – This includes anything you could buy at a local grocery store like food, diapers, baby formula, toilet paper, cleaning products, etc. 
  • Family Expenses – This category includes all of the set expenses that keep your home running, including mortgage or rent, utilities, insurance, medical co-pays, etc. The common theme here is necessities. This category will probably make up the bulk of your expenses.
  • Other Expenses – This is money set aside for regular, non-grocery items like haircuts, piano lessons, home decor, etc. These are usually “want to have” items, not “need to have.” 

There is work you will need to do to set a reasonable amount for each budget category, but we have some free budget printables that will help you stay on track. We pinky promise you'll be glad you spent the time doing this right!

Get even more variable income help with Budget Boot Camp

The last thing we want is for you to feel overwhelmed. If we can do this, SO CAN YOU! We created Budget Boot Camp to help you dive into budgeting in a fun and easy to understand way. There are 27 videos that will clear up any budgeting questions you have! 

If you don't save at LEAST what you paid for the program, we'll refund every dime. Use the code FCFBLOG at checkout to get an extra 10% off just because!

What to do when you have a higher income month

You’re plugging along, following your budget, when BOOM! Giant commission or great tip week! What now?! You might feel inclined to splurge on something fun… But when you have a variable income, it's even more important to stick to your budgeting plans. 

Here are some ideas of what to do when you have a month with a higher than expected income:

Deposit extras 

Deposit any extras you make during high season and make it work for you! Tips from Fun Cheap or Free

We recommend that everyone opens multiple bank accounts. This may sound crazy but it is a great way to organize your money in a more helpful way! You could apply your extra income towards your Family Emergency Savings Account. We recommend depositing 20% of your income here until you have enough to live on for 6-12 months. You’ll reach this goal even faster if you apply income from your “higher than average” month here!

Build up your food storage

Building a stockpile of food is another great way to apply your higher-than-average income surplus. Not only will you be able to dip into your food storage when your income hits a lower stride, but you will also be better prepared in case of natural disaster, loss of income, personal injury, or financial stress. 

It will also get you set up to start shelf cooking, which will save you big on your grocery budget! You'll be able to build your kitchen staples, which should give you the majority of the items you'll need to be able to cook delicious meals for your family without spending an arm and a leg.

Apply extras toward your financial goals

We are big on setting financial goals, whether that means a down payment for a house, retirement, paying off debt, or saving for your kids’ college. Establish a list of financial goals by priority and then start putting your extra “above average” income towards achieving them. Nothing feels better than setting and reaching a financial goal!

Create a second income stream to supplement your variable income

If you find that living off your average income is nearly impossible, you can offset the variability by creating a second income stream. There are lots of options nowadays to start a side hustle that will bring in extra money each month.

Whether your second income stream looks like watching a few extra kids, getting crafty on Etsy, or doing social marketing for a local business, you will feel empowered when you can hustle and create a more stable income. Just don’t forget to have a work-life balance so that you take care of yourself! 

A variable income does make budgeting a little trickier, but you’ve got the skills AND tools you need to establish a workable budget that will have you reaching your financial goals in no time! Don’t forget, “I’ll be there for yoooou,” every step of the way. You’ve got this!

Image with text that reads "learn how to budget on a variable income" from Fun Cheap or Free

Want more budgeting tools to add to your financial toolbelt?

  • Learn all about the easy-to-implement 70% rule of budgeting.
  • When you really REALLY REALLY want something, stick to the 3-month rule before buying it!
  • Want to get your spouse on the same financial page? Have a money date!


  1. Alysia

    I am also a self employed hairstylist. Another comlication to budgeting on our income is the fact that our “paycheck” comes in 3 forms: cash, checks, and debit/credit. On any given week, not only will our income vary, but the amount that comes in via these separate forms of payment varies. It just makes it hard to know what to do with what money.

    • FunCheapOrFree

      Man! That’s confusing! Just be sure to deposit everything immediately and spend all your money using a credit/debit card. That way you can track everything you spend. Buying things with cash is hard to track. It may mean multiple trips to the bank each week, but checks are easy because you can deposit them with your bank’s app right on your phone.

  2. Brittany

    These are great tips! Thanks! I need some tips on saving for a house. That is our biggest goal right now, but I feel like it’s a little different than saving for other things. Tips?

  3. Lauren

    RE: FCF’s comment about using phone to deposit check

    If you’re trying to save money/budget, why would a person be spending such a large amount of their budge on having a smartphone? Shouldn’t they give up those sorts of “wants” and put their “need-to-have’s” first until they get things in order?

  4. Kamryn Carlson

    Tough topic, but great and useful insights!


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