How to Build a Budget When You Have Inconsistent Income

I am tired of people talking about a monthly budget as a means of managing money. Especially for Millennials and Gen Z-ers. It doesn’t work! Creating a budget for one month’s expenses is outdated. Why? Because your average millenial or Gen Z is working multiple precarious jobs. If your expenses are changing month to month, you need a financial plan that will adapt month to month. But how to do that?

What you need is a way to approximate what your income will be over the course of a longer period of time (I suggest twelve months) and then chart not only what your expenses are but when they are. That way, you know that you have enough money set aside from a lucrative month to get you through a slow one. Does this sound overwhelming? Don’t worry! We’re in this together. 

I would like to introduce you to: cash flow. It’s time to change the way you look at your money. Time for the big picture.

Learn more about budgeting on an inconsistent income or irregular income in this week’s video!

What is cash flow?

Cash flow is the cash, or cash-equivalents, that are both incoming and outgoing. Hold on. This sounds just like a budget! Yes, yes it does. Because a cash flow document is a form of budgeting. The difference is, instead of building a month’s budget, I want to zoom out. I want to look at the whole year. I want to plan for the ups and downs well in advance. If you’re doing that, you’re taking cash flow into consideration. That’s sustainable.

How do I know if a cash flow document is right for me?

If you are unsure whether a monthly budget or a cash flow document is best for you, here are three simple questions to ask yourself:

  • Do I have a fixed weekly or biweekly income? If yes, then a monthly budget will likely suit your needs.
  • Does my income change week to week, month to month, or season to season? If yes, then a cash flow document can hugely improve your money management.
  • Do my household expenses vary greatly month to month? If you have significant seasonal expenses but your income is unchanging, a cash flow document can help you plan ahead effectively.

How do you build a cash flow document? 

A cash flow document is essentially a bunch of monthly budgets alongside each other. This allows you to map the ups and downs of your income and expenses over time. Beyond that it can be as simple or as detailed as you like. 

An example of a cash flow document is Renaissance Womanhood’s Zero-Sum Budget. If you are ready to get started, download the Excel Worksheet or the PDF Version. In one document you can track your income, track your expenses, and plan your savings. 

Want to know more Zero-Sum budgets? Be sure to tune in next week!

Until then,


xox,

Mel

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