If you were to google the term “irregular income”, the results would have you think that the only thing to do is learn to budget better when you have an irregular income.
Really? That seems kinda limiting, and as I always say, if someone is trying to sell you on a one-size-fits-all solution, they probably have an incentive for you to believe that.
While budgeting definitely comes into play, I think there are other, more critical things to think about and to take action on that I believe are much more long-term focused with the added benefit of being significantly less stressful in the short run as well.
Budgeting is looking at the expected inflows and outflows of your life, but typically forgets about one critical component, especially when you are dealing with irregular income and that is timing.
For example, say you make $100k per year, and it is from a snow plowing business where almost all of your revenue comes in over 5 months out of the year, then budgeting in July is quite different than budgeting in January.
When you are dealing with irregular income, you can’t look at a month by month budget in isolation. You also need to take a step back and look at the bigger picture over the whole year and potentially even a longer time period that spans multiple years.
That timing then requires a focus on Cash flow management over time.
One other critical element is some kind of Reserve account system that enables you to put money aside in in the high months, like January and February for our snow plow business, such that it is available in July and August and you are still able to pay your mortgage and other bills that are on a different cycle than you income.