Variable Income Budgeting: The Secrets to Success

graphic design of title, the two secrets to budgeting variable income

As I looked at the Discover card balance with tears in my eyes and a rock in my stomach, I knew it was time: after years of avoidance, I had to start budgeting. And that meant figuring out how to budget variable income too.

I launched into “how to budget” Online Research Mode and logged hours of podcast listening on long runs. Finally I found a budgeting method that was powerful and made sense to me: paycheck budgeting (thank you Kumiko Love ?). I was excited to try it!

But there was a glitch.

I’m a massage therapist in private practice ( and money mentor) and weekly income can vary between $376 – $7000.

And that’s true of most self-employed folks. Variable income leaves us especially vulnerable to relying on credit card debt in lean times. And permanently getting out of credit card debt was my number one goal at that moment.

Most budgeting education is created for employed people who have consistent income. And I saw almost nothing that was intended specifically for solo small business owners (hence building Plum Tree Money) .

Generally, if you have variable income, this is what you’re taught about budgeting: figure out your average monthly spending, and then adjust your budget accordingly at the end of the month.

For those with highly variable inconsistent income, you’re also taught to use a Hill and Valley Fund (I call it a Rollercoaster Fund). This fund protects you when income isn’t enough to cover your expenses.

Yes, a Rollercoaster Fund is essential when you have highly variable income, but how do you get started with budgeting if you’re just beginning your Rollercoaster Fund? What if you have a couple of dead income weeks?

The idea of no ready-to-use Rollercoaster fund to pull from, and falling short of my budget, scared me like swimming in choppy ocean water ( = a heckin’ LOT ). I knew I would turn to credit cards again. And I didn’t want to built the small emergency fund that we had painstakingly built over years.

So, I made two crucial decisions that allowed me to get started as a solo small business owner with variable income.

1. I decided to budget only for money that was already in the bank.

That way I was only making plans for money that was deposited, rather than money that was expected or promised. I didn’t need to think about whether a client paid the invoice, or sent the check.

And if I was only budgeting for money I already had, that meant I needed unspent income to budget for the next time period.

The shorter the time period, the less money I would need to cover that budget period. A week made sense to me. I could syphon off part of a larger package payment, and get started with budgeting right away.

2. I converted the paycheck budgeting system into a weekly budgeting system for myself, using money already in the bank

And I’ve never looked back.

What does it look like to budget weekly only with money you already have?

1. Every Sunday, before creating the following week’s budget, total up every deposit that arrived in the business bank account Monday through Friday of that week.

2. Transfer 20% of the amount into a personal savings account for future tax payments ( verify the exact percentage with your accountant )

3. Create your budget using the remaining amount, and spend that in the coming week.

So this, my friends, is how you take the guess work out of budgeting variable income.

This method is going to allow you to quickly transition into budgeting, and make a TON of progress before you even know it.  

If you’re feeling overwhelmed and not sure where to start with budgeting, I’ve got you.

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