One month you’re balling, the next you’re wondering if you should move in with your parents. Irregular income makes saving feel impossible, but with a plan it’s achievable.
- Know Your Average Monthly Expenses ( You need to stop guessing and start saving)
What Are Your Monthly Expenses?
Your monthly expenses include every dollar or loonie you spend over the course of a month. They generally fall into two categories:
Fixed Expenses:
- These are bills that come in like clockwork. Think rent or mortgage, insurance premiums, subscriptions, and utilities.
Variable Expenses:
- These change from month to month, such as groceries, transportation (gas, public transit fares), dining out, entertainment, and miscellaneous spending.
By knowing these numbers, you can pinpoint exactly how much you really need and what you can set aside for savings.
How to Calculate Your Average Monthly Expenses
Step 1: Track Your Spending for 2–3 Months
For a couple of months, keep a detailed record of every expense. Use a budgeting app, a spreadsheet, or even just a notebook. Write down everything from your regular bills to that spontaneous latte or dinner out.
Step 2: Categorize Your Expenses
Group your spending into clear categories such as:
• Rent/Mortgage
• Groceries
• Transportation (fuel, parking, public transit)
• Insurance & Healthcare
• Utilities (electric, water, internet)
• Entertainment & Dining
• Miscellaneous
Step 3: Add It All Up
- Record your expenses for each month, then add the totals together and divide by the number of months. That gives you your average monthly spending.
Knowing your average monthly expenses is the first step toward smarter saving and budgeting . Let’s break it down in plain language with an example you can easily relate with.
A Real-Life Example
Imagine you recorded your expenses over three months. Here’s a sample breakdown for an American or Canadian household:
| CATEGORY | MONTH 1 | MONTH 2 | MONTH 3 |
| Rent/ Mortgage | $1500 | $1500 | $1500 |
| Groceries | $400 | $380 | $420 |
| Transportation | $200 | $220 | $210 |
| Utilities | $150 | $155 | $145 |
| Insurance/ Healthcare | $300 | $300 | $300 |
| Entertainment/ Dinning | $250 | $300 | $275 |
| Miscellaneous | $100 | $120 | $110 |
| TOTAL | $3900 | $3875 | $3960 |
Calculation:
Average Monthly Expense = (3,900 + 3,875 + 3,960) / 3
Average ≈ $3,912
Why Bother with This?
• Clarity: Knowing your numbers gives you a clear picture of your money’s goings-on, which is way better than guessing.
• Confidence: Once you know what you really spend, planning for those lean months becomes a breeze.
• Control: You can spot where you might be overspending and adjust accordingly.
- Paying Yourself a Salary
A smart strategy for anyone dealing with irregular income.
This approach basically treats you like your own business by assigning a set “salary” for your personal spending. It not only brings structure to your finances but also helps you build savings during the good months to cover the lean ones.
How to Set Your Personal Salary
- Know Your Minimum Needs:
First, calculate your average monthly essential expenses (like rent/mortgage, groceries, transportation, utilities, etc.). This figure serves as the baseline for your personal salary.
- Factor in a Little Extra:
Once you have your bare-bones number, add a little extra to cover unexpected expenses or a modest lifestyle upgrade. But don’t go too high—this is the amount you can consistently rely on, even in lean months.
- Automate the Process:
When you get paid, transfer your set salary to your checking account for day-to-day spending. Place any leftover funds directly into your savings or a separate account reserved for emergencies or big-ticket items.
- Adjust as Needed:
As your expenses change, don’t hesitate to revisit your salary amount. It’s about finding the right balance between living comfortably now and saving for the future.
A Quick Example
Let’s say you calculated that your essential monthly expenses add up to $3,000. To be safe, you decide on a personal salary of $3,200. Now, whenever you get paid—even if one month you earn $5,000—$3,200 goes into your spending account. The remaining $1,800 goes into savings, helping you build a cushion for those months when income might dip below average
- Build Your Irregular Income Buffer (Your Financial Safety Net)
If you’re one of the many people with unpredictable income think freelancers, consultants, or anyone riding the gig economy creating an income buffer isn’t just a smart move; it’s essential.
An income buffer is essentially a rainy-day fund that smooths out the bumps during leaner months. It gives you a sense of security when your paycheck isn’t guaranteed to be the same each month.
How to Build Your Irregular Income Buffer
- Calculate Your Bare Minimum Needs:
Start by listing out your monthly essentials—rent/mortgage, utilities, groceries, transportation, insurance, and other fixed bills. This gives you the minimum amount you need to cover your living expenses.
- Set a Realistic Buffer Goal:
Decide on a target for your buffer. A common recommendation is to have three to six months’ worth of essential expenses tucked away. However, as someone with variable income, even one or two months’ worth can be a great start.
- Contribute Consistently:
Every time you get paid, earmark a portion of your surplus income (money left over after paying your “salary” for your regular expenses) to your buffer. Even small, regular contributions add up over time.
- Automate Your Savings:
Whenever possible, automate the transfer of funds to a separate savings account designated for your income buffer. This not only ensures consistency but also prevents you from dipping into the funds for everyday spending.
- . Adjust When Needed:
As your income or expenses change, revisit your calculations and adjust your buffer goal. It’s a dynamic part of your financial strategy that should evolve with your situation.
A Practical Example
Let’s say your essential monthly expenses come to about $3,000. In a good month, you earn $5,000. You decide to “pay yourself” a fixed salary of $3,200 for your living expenses. That leaves you with $1,800 extra. Instead of spending it all, you automatically transfer this surplus to your income buffer.
Over time, when you experience slower months, you can dip into your buffer to cover the gap. If you continue this habit every month, after three or four good months, you might have accumulated between $5,000 and $7,200. This buffer acts as your financial safety net, letting you ride out the lean times without worry.
- Title: Prioritize Needs Over Vibes (Because Your Wallet Deserves a Break)
Ever felt that urge to splurge on something just because it feels right in the moment, even though you know you’ve got bills coming up? We all do! But when your income is irregular, embracing the philosophy of “prioritize needs over vibes” can be the secret sauce to staying financially afloat—and even thriving.
What Does “Prioritize Needs Over Vibes” Mean?
Simply put, it’s about knowing the difference between what you need and what you feel like spending money on. Your needs are the essentials: rent, groceries, utilities, and transportation. Vibes are the fun extras—the impulse buy at the mall or that extra gourmet coffee. While vibes make life fun, leaning too heavily on them can throw your budget off balance.
Prioritizing needs over vibes isn’t about giving up what makes life enjoyable; it’s about creating a sustainable plan that lets you have fun without the anxiety of overspending. When you know your essentials are covered, you can relax and enjoy those little indulgences guilt-free. It’s a simple shift in mindset that can lead to a lot more financial confidence and less stress about the future.
Ready to balance your needs and vibes for a more relaxed financial life?
Start small, set your priorities straight, and watch your confidence and savings grow!
