How to control your spending when you have an irregular income

Even if you can't predict your income precisely, having a framework for your spending will give you more options, more choices, less stress and the  ability to cope with the inevitable financial curveballs that life throws. If you struggle with budgeting, there are some ways you can avoid the rollercoaster of ever-changing cashflow. First, you need to take a look at your current situation.

Take a look at your current spending

The first thing you'll need to do is understand what different months look like. Be as exact as possible. What does your spending look like around back-to-school time, the holidays or one-off events like moving? Accounting for all of those things in a written spending plan will be a crucial first step.

And remember to account for all those irregular but inevitable expenses like car servicing, holidays and birthday gifts. For example, if you tend to spend £1,800 on an annual holiday, then you need to include in your current spending analysis a monthly spending allowance of £150. 

Once you've got clarity on where all your money is currently going, add them up to get a total. Now that you see how much money you are spending each month, ideally you'll have enough income to cover all of your household expenses.

Think about your future income

In the previous step, the best case scenario is that your income either covers or exceeds your expenses. If that's not always the case due to lower-income months, then you'll want to figure out the lowest amount of money you'll ever make in a given month. 

In an ideal world your core monthly expenses would be equal to your lowest monthly income amount. If it's not enough to consistently cover your monthly spending, then you need to take money from your higher-income months to cover the lower-income months. We'll discuss some practical ways of doing that below. You must avoid the temptation to spend money from those higher income months, on anything that isn’t in your spending plan. 

Save the extra

A few practical things to do make sure you actually put money aside during a higher paycheck month:

• Open a separate savings account and regularly contribute to it, especially in months when your income will be higher than usual and outweigh your expenses. If you can automate this - even better, you won’t have to think about it!
• Create a small direct transfer from your current account into this savings account to add “oomph" to your savings habit. You can never have too much money available to cover you in the times where your income is lower.
• Have an emergency fund (in a separate savings account) that is for the sole purposes of covering emergencies and not regular, budgeted expenses. An emergency expense is one you could not foresee or budget for and truly need.
• If you are currently entitled to Universal Credit or Working or Children’s Tax Credit, open a Help to Save account and save up to £50 per month to get free government money equal to 50% of your savings. Find out more about it here.

Fix your cash flow

If you still experience months where you are stretched too thin money-wise, there are a few other things you can do to keep yourself afloat;

Reduce expenses in the months that you know will be tighter - perhaps entertainment, eating out or expensive hobbies. If you find yourself unexpectedly reliant on your credit card during lower-income months, try and use some of your emergency savings to meet the repayments, this should give you a little more wiggle room.

Increase your income

Of course, this sounds easier than it really is, but it's not impossible. It could mean getting an additional part-time job or  creating a side business to add extra money to your budget. And check that you are getting all the state benefits to which you are entitled by using this simple online tool.

Dealing with the reality of irregular income doesn't have to be stressful if you have a proactive plan in place. If you’re able to put time aside to assess your situation and plan for the months where your paycheck is lower than usual, you'll put yourself in a position to make progress with other financial goals like paying down debt, building wealth or planning for larger purchases.