Budgeting with irregular income

If your income swings from $3k in one month to $12k the next, a traditional budget will drive you crazy. The fix is to decouple your spending from your earning — to live on a smooth number even when your income isn't.

The baseline-salary trick

Look at the last 24 months of income. Find the lowest month you can realistically count on. Not the average — the floor. Call that your baseline salary. Your entire fixed budget (rent, bills, food, minimums) should fit inside that baseline with room to spare.

Anything you earn above the baseline goes into a separate 'income smoothing' account. You pay yourself the baseline each month out of that account, no matter what you actually earned. In good months, the account grows. In bad months, it's there.

Taxes: the self-employed landmine

If you're 1099 or running a business, the moment a client pays you, 25–35% of that payment is not yours. It's the IRS's. Move it out of your operating account the same day you receive it. A separate tax savings account is non-negotiable.

• Rule of thumb: set aside 30% of every payment for federal + state taxes if you're a solo operator.
• Pay quarterly estimated taxes in April, June, September, and January.
• Year-end surprises only happen to people who don't do this.