Method
Budgeting on an irregular income: pay yourself a salary
When your income changes every month, percentages are useless. What you need is to manufacture regularity.
The principle: two accounts, one salary
Everything that comes in goes into a buffer account. On the first of each month, you pay yourself a fixed amount into your current account, exactly as an employer would.
You then live on that amount, without ever looking at the buffer. Good months fill the cushion, bad ones empty it: that is precisely its job.
How much to pay yourself
Take your last twelve months of income, average it, and take off 15%. That margin is not excessive caution: it absorbs a bad year without forcing you to change how you live.
| Income over the last 12 months | 52,800.— |
| Monthly average | 4,400.— |
| − 15% margin | 660.— |
| Salary I pay myself | 3,740.— / month |
If you are starting out and have no twelve-month history, take the worst month you have had. You can raise it later; lowering it is far more painful.
The cushion first: this method only works with three months of salary in advance in the buffer account. Before you have that cushion, pay yourself the bare minimum and let the rest build up. Same logic as the emergency fund, but a different pocket.
The three traps specific to freelancing
- Confusing turnover with income. What lands in the account is not yours: there are costs, social contributions and tax. Count them before, not after.
- Forgetting tax. With nothing deducted at source, the bill arrives once a year and it is brutal. Set the percentage aside on every payment received, in a third account.
- Raising your salary after a good month. That is what empties the cushion. The amount gets reviewed once a year, on twelve months of hindsight.
What about the months at zero?
They happen, and they are not an accident: the method expects them. That is what the cushion is for. If you have to dip in two months running, that is the signal to lower the amount — not to wait for things to sort themselves out.
Common questions
How do I budget on an irregular income?
Run everything that comes in through a buffer account, and pay yourself a fixed salary each month. Good months fill the cushion, bad ones empty it.
How much should I pay myself?
The average of your last twelve months, minus 15%. With no history, start from your worst month: raising it is easy, lowering it is not.
How much do I need in advance for this to work?
Three months of salary in the buffer account. Before you have that, pay yourself the bare minimum and let the rest build up.
How do I handle tax when self-employed?
By setting the percentage aside on every payment received, in a dedicated account. With nothing deducted at source, the annual bill arrives all at once.
You might also like
Projects
The emergency fund: how much, where, and in what order
Three months of spending, they say. How to work out your number, where to keep it, and why it comes first.
A stable number, at last
Record what comes in and what goes out, and see your real average over several months.
Download MonniFree to start · No account · No bank connection