How to Budget on Irregular Income, Month by Month (Worked Example)
General information, not financial or tax advice. The 25 percent tax rate is an example; use your own estimate from the tax set-aside calculator.
The simple system is to pay yourself a steady monthly salary from a buffer. This guide shows it across a whole year, with real numbers and one rule for choosing the salary.
Step 1: The 12 months of income
These are example payments received in each month, chosen to be uneven:
| Month | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Received | $3,200 | $5,400 | $2,100 | $6,800 | $4,300 | $1,900 | $7,200 | $3,800 | $2,600 | $5,900 | $4,100 | $3,300 |
Total for the year: $50,600. Average month: $4,217.
Step 2: Choose a baseline
Rather than average income, use something cautious. A simple rule is the average of your three lowest months: here $1,900, $2,100 and $2,600, which average $2,200. That is the gross you can count on.
Step 3: Set aside tax first
At an example 25 percent set-aside, the take-home share of the baseline is $2,200 × 0.75 = $1,650. That is your monthly "salary". Every payment sends 25 percent to a tax account on the day it arrives.
Step 4: Run the year
Salary is $1,650 every month. The buffer is what remains in the business account after tax set-aside and salary.
| Month | Received | Tax (25%) | After tax | Salary | Buffer at month end |
|---|---|---|---|---|---|
| Jan | $3,200 | $800 | $2,400 | $1,650 | $750 |
| Feb | $5,400 | $1,350 | $4,050 | $1,650 | $3,150 |
| Mar | $2,100 | $525 | $1,575 | $1,650 | $3,075 |
| Apr | $6,800 | $1,700 | $5,100 | $1,650 | $6,525 |
| May | $4,300 | $1,075 | $3,225 | $1,650 | $8,100 |
| Jun | $1,900 | $475 | $1,425 | $1,650 | $7,875 |
| Jul | $7,200 | $1,800 | $5,400 | $1,650 | $11,625 |
| Aug | $3,800 | $950 | $2,850 | $1,650 | $12,825 |
| Sep | $2,600 | $650 | $1,950 | $1,650 | $13,125 |
| Oct | $5,900 | $1,475 | $4,425 | $1,650 | $15,900 |
| Nov | $4,100 | $1,025 | $3,075 | $1,650 | $17,325 |
| Dec | $3,300 | $825 | $2,475 | $1,650 | $18,150 |
Year totals: $12,650 set aside for tax, $19,800 paid as salary, $18,150 left in the buffer.
What the table teaches
- In the three slowest months (March, June, September) the buffer never went negative, so personal spending never changed.
- The baseline rule was very cautious: the buffer ended at $18,150, more than nine months of the $1,650 salary.
- That means you can raise your salary. A common move is to review every quarter and raise the salary toward the average of your last six months once the buffer reaches your target, such as three to six months of salary.
A faster second pass
After a quarter, recompute the baseline using the three lowest months of the last 12. Here, if you raise the salary to $2,400 a month after July, the buffer still covers a slow stretch. Check that the buffer would survive a run of low months before you do.
Do not spend the tax account
The tax money is for your quarterly estimated payments and your annual return. In this example $12,650 of the year's income belongs there. Check how the percentage is derived in the tax guide.
Do it in a spreadsheet
You can build this in any spreadsheet. If you want it prebuilt, the Freelancer Irregular-Income Money System ($19, in our shop) uses a similar approach: it sets a baseline from your three lowest months, calculates the tax set-aside per payment and shows cash runway. It is an optional paid product from us.