How to Budget With Irregular Income: Real Stories

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Maybe you chose the gig life. Think freelancer, rideshare driver, Instacart shopper, consultant, career coach, musician, tutor, etc. Maybe the economy chose for you.

“The current labor market is not one particularly friendly to workers,” says Elizabeth Renter, NerdWallet’s senior economist. “Employers aren’t doing much hiring, which makes nontraditional jobs even more appealing than usual.”

Maybe you’re a seasonal worker, server or a commission-based employee. Whatever the case, you’re seeing your paycheck go up and down. But those bills? They’re stubbornly consistent. How do you make it work?

We’re here to help. Because whether you have a boss or not, you still need to manage your finances like one.

Set a baseline for take-home pay

“A fluctuating income requires you to balance your spending more than people with predictable paychecks on predictable days,” Renter says. “It may involve buying more staples when your income is higher, to provide for leaner times, for example.”

The key, though, is to understand exactly what it costs to cover your most pressing monthly bills in a given month so you know the minimum you must earn.

“The worst mistake gig workers can make is planning for the best month of the year rather than the worst,” Rami Sneineh, co-president of Insurance Navy Brokers, said in an email interview.

His company, based in Palos Hills, Illinois, insures self-employed and other non-standard clients.

He advises people with irregular income to set the lowest-earning month of the last 12 as their baseline. Then make sure that number can cover all of your needs — rent or mortgage, utilities, groceries, etc.

“Your fixed costs should never exceed this lowest amount,” Sneineh said.

Once you have your baseline, you can use that number to plug into the budgeting method of your choice. Ideally, you’ll be bringing in enough to cover some of your wants as well as savings and debt repayment.

Save a solid portion for a rainy day

Speaking of saving, the unpredictability of gig work makes it even more important.

Lucy Todd said she left full-time employment for gig life in 2021. Todd, a career coach and freelance writer in Brier, Washington, said she prioritizes emergency savings and tries to diversify her gigs.

“You won’t make the same amount every day, week or month, and you need something to pull from when work is slower,” she said in an email interview.

A good strategy is to put at least a portion of every paycheck you get into savings. If you aren’t making enough to do that, you may need to branch out.

“Plan to earn money from more than one type of gig, ideally including a mix of short- and long-term engagements, so you have both predictability and flexibility,” Todd said.

Someone who mainly drives for Uber, for example, can consider signing up for other gig apps — like Instacart or DoorDash — to add earning opportunities while on the road.

When you work for a traditional employer, you probably get a regular paycheck with local, state and federal taxes withheld for you. If you make your living doing gigs, you may have to make estimated payments to the IRS.

Jesse Wideman, a certified financial planner in Charlotte, North Carolina, says you don’t want your tax bills to be a surprise.

“I generally tell people to at least save around 25% of whatever they’re earning from 1099 income,” he says.

That percentage keeps in mind the 15.3% self-employment tax rate as well as potential state and local taxes on top, he says.

“After a couple of years of poor planning and massive year-end tax bills, I set up a twice-monthly automatic transfer from my bill-paying account to a high-yield savings account, where the money sits until tax time,” Todd said.

On the flip side, when you’re self-employed, there are business expenses you can claim to reduce your taxable income. If you don’t know what those are, simply pull up the Schedule C (Form 1040) — the form used to report self-employed income — to take a look, Wideman says.

Gig drivers, for example, will want to pay close attention to vehicle-related expenses, while freelancers should track costs associated with having a home office.

Company-sponsored health insurance is another perk of full-time employment, and something you might have to plan for.

It might cost more than you think. Todd said her marketplace healthcare premium has gone up a lot in recent years.

“But a few extra hundred dollars a month for the freedom of gig work, compared to full-time employment just for the healthcare, remains majorly worth it to me,” she said.

Plus, you may be able to deduct the cost of health insurance premiums on your taxes if you’re self-employed.

“In financial planning, you want to set up a foundation first,” Wideman says.

He says these three areas are bedrock:

Make sure you’re effectively meeting month-to-month expenses.

Adequately build an emergency fund that can float you, just in case.

Take steps to avoid or eliminate high-interest debt.

“We can talk about investing after that,” he says.

Todd uses automatic transfers to contribute to her Roth IRA regularly, but said she’s not saving as much as she’d like right now.

For her, the ups and downs and unpredictability of gig work is worth the freedom.

“If your definition of success includes variety, autonomy and increased self-reliance, it just might be perfect for you,” Todd said.

About the author

Tommy Tindall is a lead writer and content strategist covering how to make money — and how to keep it. He’s recorded and written about his experience testing popular gig jobs like driving for Uber, delivering with DoorDash and full-service shopping for Instacart. He loves making an extra buck, but laments the hours of awkward silence he endured as an Uber driver (never again).

Cool kids might call him a content creator because he makes YouTube videos for the NerdWallet channel and app, but he himself is no longer very cool. Ask him about budgeting apps — he’s tried most of them, but still prefers a good ole Google sheet to track spending. Then be sure to smash that “like” and “subscribe” button.

Before NerdWallet, Tommy held decidedly more boring jobs at Fannie Mae and Booz Allen Hamilton. Today, he feels super privileged to write for you, the consumer.

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