When your income is predictable—it comes on a regular schedule and you know how much it will be –you can make a cash flow budget and plan accordingly.  For people that earn inconsistent or seasonal income, managing their budgets can be challenging.  Whether you run your own business, work on a contractual basis, or only work part of the year, it is hard to plan for all of your bills and living expenses.

The key to setting up a budget when your income is inconsistent is to begin with the end in mind.  How much money do you need each month to cover the essentials in your budget (food, housing, utilities, etc.)?  Collect your bills and identify the ones that must be paid every month.   These expenses represent the absolute minimum that you will need in income each month.

If you have been receiving inconsistent income for more than a year, you may be able to review your past income and determine what your average monthly income is.  This can serve as your benchmark for what your monthly income is likely to be.  You can use this to create your budget.

One way to manage inconsistent income is to deposit all of your pay into a savings account linked to your checking account.  Think of this as a holding account.  Once a month, transfer from your savings account to your checking account the amount you need to cover all of your household expenses.  Leftover income stays in the savings account.  In months when your income is higher, the balance of your savings account will grow.  In months when your income is lower, the savings balance may stay the same or may even drop.  This holding account will help you manage those income flucations and get you through every month of the year.