Irregular Income

Irregular income summary:

• People who are self-employed, contract employees, part-time workers, seasonal employees or are paid commissions or bonuses often have irregular income.

• It can be more difficult to time your regular monthly payments if your income is unpredictable.

• Experts often recommend that people with irregular income build bigger emergency savings accounts to make sure they can cover their bills.

Irregular Income Definition and Meaning

Having an irregular income means you can't count on a specific amount every payday.  Your earnings could be based on an hourly rate, and if your hours vary, your paychecks won’t be the same every time. You likely also earn irregular income if you are self-employed with a business, or a freelance or contract worker with different tasks and pay rates for different clients. Salespeople who receive bonuses or commissions can have extremely variable income.

Key Features of Irregular Income 

The key feature of an irregular income is that it's not completely predictable. "Irregular" doesn't necessarily mean low, and income that's irregular from week to week could be fairly stable on an annual basis.

You might work at a golf course in the summer, a ski resort in the winter, and drive for a ride-share company year-round. Or you might sell real estate and receive three or four big checks a year. Or you might be a freelancer with some clients who pay right away and others who take a few weeks.

Challenges of Irregular Income 

Your regular bills might be the same every month, but you won’t always know how much you’ll earn in a given month, making budgeting tricky. One month, you might earn more than enough to cover all your bills and then some—and the following month, you might not earn enough to pay everything. 

And then there are the unexpected expenses that make things especially tricky.  Perhaps you get a surprise medical bill for an urgent care visit, or your groceries cost more. Thanks to unexpected expenses, you could end up carrying credit card debt from month to month if you have irregular income—and paying off that debt might be harder. It might also be difficult to save money for the future. 

Strategies to Cope with Irregular Income 

Here are a few ways you can improve your finances even if you don’t earn the same pay every week (or every other week, or every month): 

• Determine what your minimum earnings and average earnings are. These are your worst-case and expected scenarios. 

• Build an emergency savings account to cover your expenses in a bad month.

• Create a budget based on your average earnings: Look at your income over several months, or ideally a year. Divide the amount earned by the number of months to get an average.

• Bank your extra cash: If you earn more than you expect in a given month, put that extra in a high-yield savings account for emergencies or months with lower income. 

• Increase your income, if possible: If you’re a freelance worker, look for additional clients. If you work part-time, see if you can work more hours. 

It is possible to survive and thrive with irregular income—but you might have to be more careful with budgeting and debt to avoid financial trouble.