Budgeting on Variable Income

The three main things that need to be taken into account are:

  • Definite Expenses
  • Estimated Income
  • Savings required to cover deficiencies between Income & Expense

Defining Expenses

  • Write down all non-variable monthly expenses (e.g. Rent, Utilities, Insurance, etc.)
  • Estimate all recurring variable expenses for the month(e.g Food, Fuel, etc.)

Add these together and multiply them by 1.10 -1.20 to provide yourself with a buffer  in case of any upward fluctuations of variable expenditures. Excess at the month should be saved  or split between discretionary spending and savings, with only 10-20% going to discretionary, at most, the remaining 80-90% saved.

Estimating Income

  • Average your past 6-12 months of income. Avg. Inc. = (Total income/months)
  • If possible also average your highest and lowest monthly levels of income. H&L = ([Highest + Lowest]/2)
  • Average both of these numbers to come up with a good estimate of your monthly income. Est. Inc. = ([Avg. Inc. + H&L]/2)

* You can also add in quarterly averages, if you’ve seen a recent change in your income up or down, such as change in employment status.


Take 10-15% of your estimated income and try to save it, and any excess after your budgeted expense, for handling monthly deficiencies. You can use a portion of this as discretionary spending, or rainy day fund, to help maintain your personal happiness. Also, set a baseline for a buffer in your bank account, which you can check against, say $200 dollars, and you can raise this as you progress.

*You don’t have to place it in a savings account, the interest rates are horrible currently anyways, just so long as you try not to overuse these funds.

These techniques aren’t perfect, but they do provide a very good starting line for determining how much you can reasonably spend per month. I used these basic ideas as a set of tools, slightly modified for my personal usage, and managed to pay off $1800 in student loans and save ~$1200 on a variable income that ranged between $500-1400 over 13 months. My average monthly expenses were $400 and my average monthly income was $750. I also managed to maintain a fairly consistent spending, about $50 month, on entertainment.