esther adeniyi, how to budget on an irregular income, irregular income

7 Tips for budgeting on an irregular income

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So, the way I see it, even on a regular income, people do not budget anything. Payday comes and folks just be balling all over until it is mid-month and we are financially dry. Don’t bother to ask about savings because even that is zero!

I am not trying to be self-righteous here, I was like this for months. I would like to think mine was just because I didn’t know what to do or how to to it. Budgeting seems like for people who are financially nuts and are overly particular about money. So, I just earn and spend. Well, I save a little, just a little.

Nothing is sure. I don’t know where the money is going. I just know it is going and it gets me all worked up when it’s not yet the end of the month and I am back to square one again.

Now, this was when I was on a regular income! This was when I could predict what was coming my way and I knew that nothing stops that certain amount from dropping in my account by month end. Of course, the irregular side jobs were attached to my finances but I wouldn’t give a serious hoot. I had something stable whether those ones happened or not.

Shortly before I was out of the regular income system, I was able to figure out how to budget and it worked for 2 months before the end of 9-5. Imagine how destabilized I was when I had to transition to a whole new system, the one where income was not constant.

It was a system where some months are pretty low and some others were so high that they scared me. Let me tell you something about unexpectedly high income, it destabilizes you as much as a low one.

For one, you are wondering what the heck you want to do with the money. Of course, you have plans and mental budgets and things you want to move up but you are wondering, which of these should be attended to. Prioritizing becomes a problem because you are afraid, what if I send this money down the drain?

Will I be able to forgive myself for not being financially intuitive enough to get it right? So, really, money is such a huge part of our living and I think we are not talking about it enough.

Yes, a lot of us are ashamed and embarrassed to talk about how much we earn, how we spend it, what we spend it on, whether we even saved or not, how much we owe. Whether we even invested is another story on its own because we don’t even have real investments.

So everyone is very quiet about money. We would rather be financially insecure than talk about money and trash things out. I have begun to open up though. I am open to allowing financial experts to get through to me and turn my mindset around when I watch their videos. I do not intentionally block or dismiss. I take money seriously now because I am not about to set myself up just because I was too afraid or too ignorant.

If you missed the post I shared about women and money, you may need to go check it out.

Okay, now that we are dealing with an irregular income, what do we do with the money and how is it ever going to be enough? How do we plan with it? How do we work around these figures so that we do not splurge, we save for the rainy day and we have more than enough to live on on the average?

Below, I share some tips on how to budget on an irregular income. These are from what I am personally doing and I see to work for me. Maybe you have to be more dynamic about yours or tweak some of my own tips to work for you. Whichever this is, you should find this really helpful to run with.

1. Work around your lowest possible income

Before, I used to work on an average but I quickly realized that this was not realistic at all and I fell pretty short sometimes. So, you want to be very realistic because it is much easier to add to the budget than subtract from it.

So, I do all of the budgeting on the lowest possible income around that season and add an X.

Say, for example, I am budgeting around B Naira because B is my lowest possible income, I build my budget with B + X

2. Assign the low priority spending to X

Low priority depends. It means if I do not get this thing this month, will I be able to live by? Will my business survive? Can I afford to do away with this item? Obviously, X can never be assigned to food or rent. Maybe, wardrobe budget is under X, or a new phone but never tithe or saving or transport.

X is the extra on top of your lowest possible income. Say you earn 100K at least and this month, you earned 50K more, that’s Your X.

3. I draw up a budget with the 50-30-20 rule

Now, I must confess because this is very dynamic for me. I will have to first explain the 50-30-20 rule.

It means that 50% of your monthly income goes to your needs. These are things like groceries, transportation, healthcare, rent. Actually, the people who developed the 50-30-20 rule obviously pay rent monthly. So, what you can do in this case is to divide your yearly rent by 12 and put that amount away for rent.

30% of that monthly income can go to your wants. So, if you want to go on vacation, you can put this into this category. You can assign entertainment to this too.

The remaining 20% should go to savings and debt. As I said, the people who came up with this system are obviously not Nigerians because they usually have student loans to pay off. So, debt is a legit part of their budgeting. It is not a weird thing to talk about for them. It sure looks like something a Nigerian never wants to reveal, lol.

But like I mentioned earlier, I have adjusted my own percentages and it is more like 20-30-50. 50% is my savings. This means that I save half of my income because bruh, I am an irregular income earner here, I can’t afford to save less than that. This is my own system, it may not work like this for you.

I then, dip my hands into my savings for investments that I am sure are profitable. This is so that the money doesn’t just sit there. What this means is that my savings is my own bank and I trade with it. I put back the Return On Investment into my savings.

4. I have four different bank accounts for different purposes

They are all savings accounts actually but I not only want to be able to separate my salary mentally or on paper, but I want to be able to know how much they are in reality. I used to have only two. I opened two more for this purpose.

Bank A is my utility account, this from where I take out my spending. It is the bank whose card I use for online transactions. Sometimes things are deducted and I already forgot that my card is billed automatically. Even though I do not like that it has happened but I am able to absorb that because it is my utility account anyway. I never ever submit my other cards for anything online.

Bank B is my savings account, this is where I put away all my savings and return on investment.

Bank C is my business account. It is not a business account in the real sense of the word, it is a savings account. It is just where I put in money that I use for business development.

Bank D is where I put in money for giving. It is a GTCreate account with gtbank so I use the same app for both the GTB savings and GTCreate. It is very easy for me to tuck it away. When I have exhausted all I have for giving for the month, I stop giving. Now, I must be very candid, many times I overshoot because you know… But starting from this month, I am learning discipline even in giving.

4. Now, create your budget based on your percentages

I will give my own template, you can do yours like you want or adjust my own template.

Tithe – 10%
Savings – 50%
Giving – 10%
Food and Groceries – 5%
Daily expenses
Wardrobe – 5% + X
Business development
Rent – 8%

For the ones without percentages, I write the actual amount I am allocating to them. I usually add X to wardrobe or business development. Also, some people add health to their budget, I just remove mine from miscellaneous if I have to.

5. Allow some slips

Until you become perfect, you will realize that you omitted some expenses and did not budget for it. Don’t beat yourself up. Just adjust that for the following month.

After a while, you become very good at budgeting and all you will need to do is just copy and paste for the following month and adjust percentages if you need to.

6. You will need to be disciplined

I must confess to you, I was not disciplined at all. I had to learn discipline around money. I wasn’t even buying the latest shoes or clothes, but I would lend money out recklessly and not have them given back. I know that you think this is a good thing, it is not!

You have to know how to protect your finances from savages. These are people that will come to you sober and become monsters later. You will also need to be disciplined around little expenses, expenses that look small. When these things add up, you will be surprised how much they are in the end!

7. Put the money you don’t spend in an emergency account

Sometimes, God just sends someone to bless you and you realize that you don’t have to buy data for the month, or you don’t even have to spend on entertainment because someone did your Netflix subscription or gave you free movie tickets or paid your restaurant bill.

Sometimes, you may even realize that you won’t have to spend anything on transport because someone is now taking you to school or to work. If you don’t want to put the money into savings, tuck it away in an emergency account. If you live on an irregular income, you know that no one has to remind you of how much you need contingency funds. It may just be a small savings box at home or your sister’s account or something.

So, disclaimer: I am not a financial expert or planner. I just shared what is currently working for me. Financial experts may have a different opinion or strategies that can work better. I am really open to them. I, however, hope that my tips on budgeting even on an irregular income has helped you. If you have any other tips that have worked for you, would you kindly share in the comments section? I would love to hear from you.

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