Most budgeting advice assumes the same amount lands on the same day every month. If you freelance, work shifts, earn commission or run a small business, it doesn't. One month brings $5,700 and the next brings $2,600. The method below works with that. It takes about an hour to set up, and after that it runs on one decision a month.
01Why budgeting on your average fails
The obvious move is to add up a year of income, divide by twelve and budget that. The trouble is timing. Your rent is due every month, and your average only shows up across the whole year. In a month that brings in less than the average, a budget built on the average spends money you don't have yet, and the gap lands on a credit card.
So flip it. Budget on the least you can reasonably expect, and treat anything above that as a bonus with a job to do. You end up with four steps: find a baseline, cover essentials first, build a buffer, then pay yourself the same amount from that buffer every month.
02Step 1: find your baseline month
Write down what you actually received in each of the last 6 to 12 months. Use money that reached you, not invoices you sent. If tax isn't taken out before the money reaches you, move your tax share aside first and use what is left. How much that is depends on where you live, so check your own country's rules or ask an accountant.
Then pick the lowest month. That figure is your baseline: the amount your budget has to live on. Here are six months for an example freelance designer, after tax money was set aside.
Example figures. The six months add up to $24,000, an average of $4,000. The lowest month, May, is the baseline.
The average says $4,000. The baseline says $2,600. Budgeting on $4,000 would have left May, June and August short by $1,400, $500 and $900. Budgeting on $2,600 leaves no month short.
03Step 2: cover essentials first
Now spend the baseline on paper, in order. Essentials go first: the things that cause real damage if they go unpaid. Everything else fits into what is left, or waits for a bigger month.
| What | Per month | Running total |
|---|---|---|
| Rent | $1,250 | $1,250 |
| Utilities and phone | $180 | $1,430 |
| Groceries | $450 | $1,880 |
| Transport | $160 | $2,040 |
| Health insurance | $140 | $2,180 |
| Minimum debt payment | $120 | $2,300 |
| Flexible: eating out, clothes, fun | $300 | $2,600 |
If your essentials alone come to more than your baseline, you've learned something important early. Either the baseline has to rise (more steady work, a retainer client) or an essential has to shrink. It is better to know that in a planning session than in a thin month.
Essentials are also hiding inside ordinary purchases. A single grocery trip usually mixes food you need with things you like. Here is one, sorted line by line.
Corner Market
Tue 8 Sep · 18:40
| Item | Category | Price |
|---|---|---|
| Rolled oats 1 kgFood & Dining | Food & Dining | $3.49 |
| Eggs, dozenFood & Dining | Food & Dining | $4.29 |
| Milk 1 galFood & Dining | Food & Dining | $3.89 |
| Bananas2.00 lb @ 0.59Food & Dining | Food & Dining | $1.18 |
| Chicken thighs2.00 lb @ 3.49Food & Dining | Food & Dining | $6.98 |
| Rice 5 lbFood & Dining | Food & Dining | $5.99 |
| Canned tomatoes3 @ 1.29Food & Dining | Food & Dining | $3.87 |
| ToothpastePersonal Care | Personal Care | $3.79 |
| Craft beer 6-packFood & Dining | Food & Dining | $11.99 |
| Chocolate bar2 @ 2.49Food & Dining | Food & Dining | $4.98 |
- Subtotal
- $50.45
- Store card: eggs
- -$0.50
- Tax 7% on 15.78
- $1.10
- Total
- $51.05
Debit card
The first eight lines are essentials: $29.69 of food staples and $3.79 of toothpaste, $33.48 before the discount and tax. The beer and chocolate come to $16.97, about a third of the $50.45 subtotal. Notice that the category doesn't settle it. The chocolate is filed under Food & Dining just like the rice. You decide what is essential, and a thin month is when the $16.97 waits.
04Step 3: build a buffer
The buffer is a separate savings account that sits between your clients and your spending. All income goes into it. Nothing is spent straight from it except your monthly pay to yourself.
Pick a target in months of baseline. The example uses three months: 3 × $2,600 = $7,800. Early on, the first milestone that matters is one full month of baseline sitting in the buffer, because from then on a late invoice no longer means a late rent payment.
05Step 4: pay yourself the same amount every month
On the same day each month, move your baseline from the buffer to your everyday account. That transfer is your paycheck. You budget and spend from it exactly as someone on a salary would. Here is the example designer's half year, starting from an empty buffer.
| Month | Came in | Paid to yourself | Buffer at month end |
|---|---|---|---|
| April | $4,800 | $2,600 | $2,200 |
| May | $2,600 | $2,600 | $2,200 |
| June | $3,500 | $2,600 | $3,100 |
| July | $5,700 | $2,600 | $6,200 |
| August | $3,100 | $2,600 | $6,700 |
| September | $4,300 | $2,600 | $7,800 (and $600 moved on) |
Check the arithmetic: $24,000 came in and 6 × $2,600 = $15,600 went out as pay, leaving $8,400. September would have ended at $8,400, which is $600 over the $7,800 target, so that $600 moved on to a goal. The buffer sits at the target, and every month the designer got the same paycheck, including May.
Now suppose October brings in only $1,200. The buffer goes from $7,800 to $7,800 + $1,200 − $2,600 = $6,400. The paycheck still arrives in full. That is what the buffer is for.
06What to do in big months and thin months
- Big month, buffer below target: everything above your pay stays in the buffer. Resist spending it because it feels like a windfall.
- Big month, buffer at target: give the extra a job. Pay down debt, save for a goal, or put a slice toward something fun you planned for.
- Thin month: pay yourself the baseline anyway, from the buffer. Don't cut your pay unless the buffer is running down month after month.
- Several thin months in a row: that is a signal about your income, not your budget. Lower the baseline, trim the flexible line, or look for steadier work before the buffer runs out.
- Raising your pay: only after your baseline has gone up for a sustained stretch, and your buffer is at target. Raise it once, then hold it.
Once a month, sit down for 20 minutes and check three numbers: what came in, what you spent against your paycheck, and where the buffer stands. A monthly money review is a good home for this, and a grocery budget built from your own receipts makes the biggest flexible line easier to hold.
07Tracking it in Sorayli
Sorayli does not connect to your bank, so it only knows the money you record. For this method, that is fine. The buffer lives in your bank. Sorayli's job is to show what came in and what went out.
- Record each payment as income when it arrives. On the web and in the iPhone app, the add form has an Expense or Income switch. Income has its own categories, and an Income details section with a client name, an invoice number and a Taxable income option.
- Don't log the monthly transfer to yourself. Sorayli has no accounts, and the add form offers only Expense or Income, with no transfer option, so recording the move as an expense would count the same money twice. Record the spending you do from your paycheck instead, typed in or scanned from the receipt.
- Set a monthly budget on All categories for your baseline, here $2,600. With the default alert at 80%, Sorayli emails you after spending reaches $2,080, and sends an iPhone push if you turn push notifications on. The alert comes from a scheduled check, so it arrives after the purchase that crosses the line, not with it. Alerts work for monthly budgets.
- Add a second budget on the category your groceries land in. A budget counts only expenses filed under its exact category. In a new account that is Food & Dining, which also holds eating out; add your own Groceries category if you want to watch groceries alone.
The dashboard on the web and the iPhone home screen show this month's income, expenses and savings rate, and how your income and spending compare with last month. With irregular income, expect the savings rate to swing: high in a big month, below zero in a thin one. That is the buffer doing its job. The number to watch is your spending against your fixed paycheck.
To find your baseline from income you have already recorded, open Analytics on the web, choose a custom date range covering one month, and read Total Income. That works on every plan. On Pro and Family, the 6-Month Trend chart puts income, expenses and savings for each of the last six months side by side. If you are new to Sorayli, take the last few months from your bank statements or invoices instead. There is more on running freelance money through Sorayli in its own guide.
How much buffer do I need with irregular income?
Start by aiming for one month of your baseline, because that alone ends the late-invoice scramble. Then pick a bigger target that matches how uneven your income is. The steadier your work, the smaller the buffer you need.
Should I budget on my average income?
Not for your monthly spending. Your average arrives only across the whole year, and your bills arrive every month. Budget on your lowest normal month and let the months above it fill the buffer.
What if my lowest month doesn't cover my essentials?
Then you have a gap to close, either by earning more steadily or by cutting an essential cost. Until it closes, the buffer is covering part of your essentials every thin month, and you should watch it closely.
Can Sorayli track money coming in, not just spending?
Yes. Choose Income instead of Expense when you add an entry, on the web or in the iPhone app. Sorayli then shows each month's income next to your spending, but it can't see your bank account, so it only counts what you record.
