If you had thought that lack of a steady income makes budgeting or financial planning irrelevant, you couldn’t be further from the truth. If budgeting is essential for those with fixed incomes, it is more so for those without a fixed monthly income.
That is because you will be earning more than your monthly average in some months and less in others. Financial management and planning helps you ensure that you don’t overspend in the months where you have surplus earnings.
You can rather spread them evenly over months where your income may not be as high as your expectations.
If you’re a commissioned salesman, a landscaper, a freelancer, a contractual employee or anyone without a stable income, you’ll find the following tips helpful.
Step-Wise Guide to Planning

• Monthly average income estimate: The first step of budgeting requires you to find out a rough estimate of your monthly income. It is not just enough to calculate the average income per month over the last year or so. You’ll have to find out the lowest monthly income points and the highest points. If your income changes seasonally or if the variation in income is too large between certain months, this is essential. Dig up your data over the last five years at least to see whether there is a visible pattern or trend in your monthly incomes. You should fix the average of the lowest points as the baseline for your budgeting calculations to ensure that you don’t end up squandering your income. Keeping a tight leash on your discretionary spending is recommended.
• Allocate your funds to different categories and subcategories: Once you have an income estimate, you should start walking backwards. Instead of forecasting randomly, check your bills from past months to have an idea of your expenditures. Now, you can categorise your expenditures in – essentials, financial goals or priorities and discretionary spending.

• Essentials/Necessities: Essentials would include home rent, mortgage, utility bills (small monthly deviations are acceptable since you just need an estimate), fixed medical expenditure, if any, food and groceries (the bare minimum), transportation and all other fixed costs.
• Priorities: If essentials mainly deal with your liabilities, priorities will include investments made for asset creation and maintenance. This may be your fixed systematic investment plans for buying units of mutual funds, structured funds, unit trusts, bonds, equities and fixed deposits.
• Discretionary Spending: This will include your non-essential expenditures. After you have contributed sufficient funds to the other two heads, you can use the zero-sum allocation method to allocate amounts to fixed heads under the discretionary spending category until the balance becomes zero. It helps you stay within your budget.

• Build a cash cushion: If you have surplus income, you need to create an emergency fund that will offer you a comfortable cushion for your exigencies. Usually having a 6-12 month cushion is recommended. This fund will help you tide over periods when your income becomes too low, you encounter a sudden health emergency or there’s a sudden market crash that dissolves your investments. You can contribute your surplus earnings from a month to this fund.
• Account for other major events: Are you planning to buy your first HDB flat or your second property in Singapore? Are you planning to get married? While budgeting, don’t forget to account for these big-ticket events. While event-specific planning doesn’t need to be a part of your broad-based financial plan, you need to have an estimate of the costs involved with such events.
• Set up separate bank accounts: Spending from one bank account can become very tricky. It becomes difficult to keep a track of every single spending. Set up separate accounts for emergencies, priorities, necessities and your non-essential expenditures. Managing your funds become a lot easier.

You may not be able to get your budget right the very first time. It requires diligence. A trial-and-error method works best initially. Getting hold of data from the past is also important.
Try not to stretch your discretionary spending too much. Try to cut down on your weekend parties and unplanned holidays. However, be realistic while planning. Don’t be too conservative with your estimates because you could end up drawing a wrong picture.