It can be challenging to create and keep to a budget when you know exactly how much money you have from one week to the next, but when you have variable income it can seem impossible. How can you budget when one month may result in ?2000 of income and the next only ?750? Having an unpredictable income is common for contractors, sales people who work on commission, and self-employed business owners. Here are 3 tips for creating a budget you can live with despite the variable income.



Set Up an Overflow Account

When you have a good month of income and make more than your monthly expenses, you need to deposit most of the remaining income into a special account. This account should only be accessed during the months where your income drops lower than the money you require to pay your living expenses. For example, if your expenses are ?1000 a month and you make ?2000for two months in a row, you would have an extra ?2000 in your overflow account at the end of month two. When the third month comes and you only make ?750, you can just pull the difference from your overflow account. This account should really be a savings account with a high interest rate, but some current accounts might also be good for this. Take a look at the savings and bank account options available from Alliance and Leicester for more.

Buying essentials

When you've got money in the overflow account to help you during lower income months, you can start using some of the money from a higher income month to stock up on essentials. Canned and boxed food products, toilet paper, and paper towels are all good choices for things to keep in excess. You can also try to keep a good supply of meat in the freezer. Buying in advance also allows you to take advantage of sale prices and coupons to get everything at the lowest possible price.

Pay In Advance

Another method many people with unpredictable income use is to pay some of their bills in advance. Once you have your overflow account set up as a cushion, you can use some extra money on a higher income month to pay an additional payment on the mortgage or car loan. If you typically have a busy season during the summer months, for example, you can work to pay some of your loan payments early so that when the slower work period arrives in the winter, you may be able to skip a payment since you've pre-paid. If you're looking to refinance, then take a look at Alliance and Leicester for deals on online loans.