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How to budget with a variable income

When you own your own business budgeting can be difficult. After all, your income can change dramatically from month to month. But with the right strategy you can make smart financial decisions even when your income is uncertain.

Creating and implementing a budget that’s effective for you can help make your money work, bringing you closer to financial independence and the goals you have. It doesn’t matter what tools you use to create your budget; excel, spreadsheets, pencils and apps will all work.

Identify your base

The first part of establishing a proper budget is identifying how much money you spend each month. Even when your income fluctuates your spending should stay relatively stable. Some of the costs you should consider are

  • Bills and Utility
  • Rent
  • Insurance
  • Travel/car costs
  • Repayments
  • Groceries

Take the time to go through your receipts for the past few months to work out an average spend. This amount will then become your base: the amount of money you need to earn on a monthly basis in order to get by without accumulating debt.

If you earn more than this base amount, you can start looking at optional expenses, like entertainment, investing, eating out and any hobbies you may have. These are things that are nice to have, but if your income is variable you might not be able to afford them every month. It’s important, therefore, to separate them from your base costs and consider them as extras.

By putting your base expenses first, you can start to gain monetary oversight and prioritize the right things.

Create a savings account

It’s well and good to set a budget, but if you have excess money at your fingertips it becomes all too easy to spend.

To help avoid impulse buying create a second account, and place any money you earn above your expenses threshold into it. This will help cushion you in tough financial times, act as a potential emergency fund, and help you save money.

Utilizing it correctly will help you put away enough money to pay your taxes, and potentially invest in a home for the future.

Make sure you’re spending wisely

It’s easy to stick to old habits, but if your financial situation changes so should your spending. For instance, there are multiple types of supermarkets. Some are artisan, some generic, some budget, and quite often the quality of food in each is fairly similar.

Simply changing where you spend your money (instead of on what) can help you save a lot of money – and all the little amounts add up quickly.

That said, you may also need to reduce instead of just adjust.

For example, if you frequently buy books, join a library. If you buy clothes often, try to get in the habit of only buying items on sale. If you drink two cups of coffee a day, drop it down to one. Small changes can, over time, make a large difference: one less cup of coffee per day could save you over $1,000 a year.

If you realize that you’re living well above your means, you can even consider more drastic actions such as selling items or moving.

Establish a new Income Stream

If you’re wholly dependent on one variable income stream you can quickly fall into financial troubles if something goes wrong. While you’re building your own business consider picking up a part-time job to support yourself.

There’s no shame in shoring up your finances, and it can give you the freedom to take the creative risks you’ll need to in order for your business to grow and thrive.

It can also help you achieve your financial goals faster, freeing you from some stress and anxiety and enabling you to build the life you envision.

Keep Adjusting

There’s no such thing as an entirely complete, perfect plan – because things change. Instead of being staunch to outdated plans, roll with the punches: your income will change and grow, your expenses may change and grow, and it’s important to stay dynamic in order to stay financially sound.


Managing variable income incorrectly can cause extreme stress and anxiety, and have real life consequences. Learning how to calculate your base costs can help give you monthly income goals, and splitting your income into two accounts can help you squirrel away rainy day funds and savings.

When you adjust your life accordingly, having a variable income doesn’t need to be a barrier to the goals you want to achieve.

Lena Klein

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