Five Steps for Budgeting for a Fluctuating Paycheck

Published on Jan 01, 2014 06:00 am

Jobs that offer fluctuating paychecks, like some sales, real estate or service industry positions, can offer competitive salaries. However, incomes in these professions aren’t always consistent. You might know that you’ll get the money, but you won’t know when. As such, your paycheck can fluctuate from month to month. Given that many of the bills that make up modern life need to be paid monthly, this can create a budgeting challenge. However, controlling your monthly expenses and setting aside paychecks can help you meet your financial obligations.


Step 1

Create a monthly budget that lists all of your must-pay expenses. This budget would include your mortgage or rent, car payment, possible student loan installments, utilities, and a minimum amount for food and incidentals. This is the amount of money that you could live on, even if you’d like to have a bit more. If necessary, set up your budget to account for variations throughout the year — your electric bill may go up in summer when you use air conditioning, while you might have the added expense of paying a snow plow service in winter.


Step 2

Keep any income that you don’t need for your day to-day expenses in a separate bank account to help you avoid depending on the supplemental income in the future. Examples might include a commission bonus for a sales representative or an exceptionally large gratuity if you’re in the service industry. Using a separate account helps you keep any extra money you get (and may need during a dry spell) out of sight and out of mind.


Step 3

Consider calculating the taxes you’ll likely owe on your paycheck if they aren’t already withheld and put it in another separate account. Your tax liability could vary depending on how much you make, where you live and how many deductions and expenses you have. While you can calculate the tax rates by looking them up at the IRS website and at your state’s website, you may need an accountant’s help to figure out the impact of personal and business deductions and to plan how much to take out relative to what your taxable income will be.


Step 4

Make a deposit to your emergency and retirement savings accounts. The amount you can afford to give will vary based on how much money you will make in a year, but you might find it helpful to get in the habit of always making a payment to your savings. There are many rules for how much to save. One common rule is to have six months’ worth of living expenses in an accessible emergency fund (not tied up in a retirement account). CNN Money reports that financial planners recommend saving 10 to 15 percent of your income routinely for retirement.


Step 5

After you’ve met your other obligations, pay down high-interest-rate debts. Any money left over after you’ve paid down debt can be used for additional savings or spending. Depending on the interest rates you are being charged, this can be more financially valuable than putting money towards savings. Determine how much debt you owe and what extra amount, if any, can be applied toward paying it down to zero. When you have a fluctuating income, the lower you can make your monthly payments can be, the better.


Recipients of irregular or fluctuating incomeinclude small-business owners, service industry professionals and real estate agents who have a large proportion of their income coming from the sales they contribute toward their company of employment.


For example, a small business owner might only pay themselves after business expenses are paid. Real estate agents receive commission from the homes they sell and service industry professionals, like hairstylists or bartenders, receive gratuities. If you plan to work or are currently employed in a position with a fluctuating income, it’s important to have an organized financial plan to keep your credit worthiness intact and your personal finance goals on track.



About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.


This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2014, Inc.  All rights reserved.

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