How to Write a Monthly Personal Budget for a Variable Income

I've written a handful of articles that outline how to write a personal budget. The basic premise is, if you don't tell your money where to go before you get it, it will run away. This is very easy to plan for if you know the amount of your paycheck weeks before it shows up. However, it requires a different technique if your paychecks vary greatly. For example, if you own your own business or if you are a sales person or real estate agent, or if you just get different numbers of hours each pay period, you would fall into this category.

At the top of the page, make a list of the possible sources of income for the coming month. For example, it might look something like the image for this step. Remember to include all sources of income for the coming month, including bonuses, tax refunds, and the like.
Start sorting your budget categories by priority. After each category, write down the needed amount. Look at the image for an example.
You can include the same category twice on the list as well. For example, it might be very high priority to get $300 for food in the coming month, but if you have a really good month, you might want an additional $100 for some luxury food after you've taken care of all essentials.
Make sure you have more money designated than you expect to earn. You don't want to have an excellent month and then discover the next month that you don't know where all your earnings went!
As your earnings come in, go down the list and check off the items that are funded. As they are funded, go ahead and fund that item. For example, if you have $300 designated for food, go ahead and withdraw $300 in cash and put it in an envelope labeled "Food". Use only that money to buy food.
Consider creating a "Hill and Valley" account. This is an account that you fund during good months and draw from on bad months. This will allow for a certain amount of regularity in your monthly finances.

Copyright 2009 by Michael Nehring