How to Budget When Self-Employed

Part of the excitement that comes along with being self-employed is knowing that no day looks the same. As fun as being your own boss can be, having an inconsistent paycheck can present challenges, especially when it comes to managing your spending. Budgeting can get a bit trickier when your income ebbs and flows, but it isn’t impossible to nail down a budget that will work for you. Let’s look at how to budget when self-employed, since you need a budget that takes the fact that you have an inconsistent income into account. 

Self-employed budget tips

When you don’t know exactly how much money you bring home each month, budgeting may feel like an impossible task. While you’ll never be able to perfectly estimate how much you’re going to spend or earn in a month, creating a self-employed budget can still help guide your spending and saving choices. 

Start with your lowest monthly income estimate 

When it comes to budgeting when you’re self-employed, it’s best to assume the worst. When planning your budget, try to focus on the lower end of your income estimate. It’s better to have extra money left over at the end of the month than to not have enough to cover your expenses. 

Include business expenses

If your business expenses come out of your take home pay (which they very well may in the early days when business and personal income tends to mingle), make sure to budget for those expenses. Ideally, you’ll have a separate budget for your personal finances and business finances, but if you don’t, make sure to account for any business expenses. 

Pay yourself at the beginning of the month

One way to make budgeting easy is to pay yourself at the beginning of each month. How much you “earn” each month when self-employed is a whole lot different than what you actually get “paid” that month. For example, if you invoice a client at the end of the month, you may see that money come in a matter of days or weeks, or even a month or two later. If possible, try not to touch the money that comes in during the month and at the beginning of the next month you can “pay yourself” for the month and will know exactly how much you have available to spend. 

Build an emergency fund

While everyone should have an emergency fund, having one when your income is a bit inconsistent can really make it easier to sleep at night when you’re short on funds. Start saving for that rainy day emergency, because if you’re not ready for it, you can end up dealing with a lot of financial stress that can be avoided by having an emergency fund ready and waiting. While emergency funds are usually a backup plan for an unexpected medical bill or car repair, as someone who is self-employed you may need to tap into if one of your clients doesn’t pay you on time or a project you were banking on falls through. 

Ready to take your budget to the next level? We dive really deep into how to create a budget — and provide really helpful budgeting templates — in our Finance 101: Mastering Your Finances course!