Variable Income Budgeting

Faith & Finance

If you’re self-employed, a contractor, or a small business owner, you’re probably familiar with the ups and downs of variable income. In some months, your earnings may exceed your expectations, while in others, they may fall short. This makes budgeting a little more complex—but not impossible! Let’s walk through how to create a budget tailored to your fluctuating income.

Start by Finding Your Average Income

The first step is to look at what you know. Review your income from the past six to 12 months and total it. Then, divide that total by the number of months to find your average monthly income. This figure will serve as the foundation for your budget, helping you set realistic expectations. You’ll make more than this average in some months, and in others, you'll make less. That’s okay—as long as you plan for it.

Save Excess Income for Lean Months

Here’s the critical piece: In the months you earn more than your average, save the excess. This savings will buffer those lean months when you don’t meet your income target. Even when you have extra at the end of the month, resist the urge to spend it. Treat your budgeted amount as your spending limit, and let the surplus bolster your savings.

One effective way to manage this process is to funnel all your income into savings and set up an automatic transfer of your budgeted amount into checking each month. This way, you only spend from checking and staying within your budget.

As you get started, you might find your budget doesn’t quite match your actual spending. That’s normal. Track your spending closely and revisit your income average every six months to make necessary adjustments. Over time, your budget will become more accurate as you get a better handle on your fluctuating income.

Tips for Building Your Budget

Whether your income is variable or steady, here are a few tips to set up your budget successfully:

1. Track Your Spending: Begin by recording every single expense for 30 days, no matter how small.
2. Plan for Non-Recurring Expenses: Don’t forget those irregular costs like annual fees or holiday gifts. Divide them by 12 and include them in your monthly budget to avoid surprises.
3. Build a Category-Based Budget: Once you’ve tracked your spending and considered non-recurring expenses, group your spending into categories. Tools like the FaithFi app can help with this step.

Bring Your Budget in Line with Your Goals

Once you’ve drafted your budget, ensure it aligns with your financial goals and priorities. If your spending exceeds your income, it’s time to trim back and make changes. Discretionary spending—like dining out, entertainment, and shopping—is often the first place to cut. The FaithFi app’s digital envelope system can help manage these areas effectively.

It’s tempting to think that budgeting isn’t necessary, especially if it feels complicated or tedious. But the truth is, living without a budget makes spending less than you earn nearly impossible—and that’s key to financial success. Without a solid budget, debt can creep in, and saving for the future becomes challenging.

A budget, or spending plan, gives every dollar a purpose. It allows you to maximize your giving and saving while ensuring your spending reflects your values.

Biblical Principles for Wise Money Management

Whether you earn a little or a lot, it’s important to remember that we’re called to be wise stewards of the resources God has given us. Proverbs 27:23 reminds us to “know well the condition of your flocks, and give attention to your herds.” For us, this means knowing how much money is coming in, how much is going out, and where it’s going.

A spending plan helps us faithfully manage God’s resources. With a little planning and discipline, even those with variable incomes can have a budget that honors God and sets them up for financial success.

By following these steps, you’ll discover that budgeting with a variable income is possible and can lead to a life of greater financial peace and generosity.

On Today’s Program, Rob Answers Listener Questions:

• My wife and I are looking to make a budget. Since we can't use Mint anymore, we're considering the envelope system to track our spending in real-time and avoid overspending. What are your thoughts on that compared to other budgeting methods?
• I have a Roth account, and I need to withdraw about $55,000 to pay for a piece of land I'm buying. The money I'd like to withdraw that's not already in stocks would be from a maturing CD. Can I temporarily withdraw $55,000 from the Roth account until the CD matures and then pay it back?
• My brother is 66 and plans to work until he's 70. He wants to be able to save some kind of fund after he's gone to help his adult autistic son, who lives in a group home. What would you recommend as the best way for him to set that up?
• I've read Ron Blue's book ‘Splitting Heirs.’ Could you recommend any other resources I could study to prepare to talk with my adult children about God's will and the estate plan I've set up?
• Someone mentioned that a spouse could receive half of their husband's Social Security on your program. How does that work? Does it relate to our ages?
• I accumulated about $7-8,000 in credit card debt. I'll be leaving my current job soon, where I have a 401(k), about the same amount as my credit card debt. Would it be wise to use that 401(k) money to pay off the credit card debt, or do you have any other suggestions?

Resources Mentioned:

• Christian Credit Counselors
• Create A Thriving Family Legacy: How To Share Your Wisdom And Wealth With Your Children And Grandchildren by Jeff Rogers
• Splitting Heirs: Giving Your Money and Things to Your Children Without Ruining Their Lives by Ron Blue
• Look At The Sparrows: A 21-Day Devotional on Financial Fear and Anxiety
• Rich Toward God: A Study on the Parable of the Rich Fool
• Find a Certified Kingdom Advisor (CKA) or Certified Christian Financial Counselor (CertCFC)
• FaithFi App

Remember, you can call in to ask your questions most days at [phone]. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.