I love a good surprise. An interesting plot twist in a movie, a party for a friend, an unexpected postcard in the mail from someone’s trip abroad. But I don’t like surprises when it comes to my money. (Looking at you, you silent and sneaky annual Amazon Prime renewal fee.)
And while a solid zero-based budget, in which every dollar is accounted for, helps mitigate most unexpected expenses, having something even more airtight suits me better. My income from my salary as a full-time STM publisher is steady, but being a sometimes-side-hustler with inconsistencies in my monthly earnings makes my budget a little wobbly sometimes.
In a perfect world, we’d all know exactly how much we’re earning each month. Sure, some folks get to live this way, but for the rest of us, budgeting can be a little less predictable and consistent. Here’s a trick I’ve learned: zero-based budgeting using the side hustle money earned during the prior month. Don’t worry, I’ll explain.
Types of irregular income
Unexpected side cash: Sometimes I’ll take a random odd job, like copy editing a PhD dissertation or babysitting the kid down the street. Sometimes I’ll even get realllly lucky and my kind mom will toss me a hundo (Note: This is bribe money to get me to visit her back home in Connecticut). This isn’t major change, but these odd amounts of side cash can certainly accumulate throughout the course of a month.
Deciding what to do with that money as it comes in, bit-by-bit can be challenging, but stacking it up throughout the month and tossing it into my budget for the next month makes decision-making about how to use the accumulated money easier. It makes sense, right? It’s easier to make important decisions when you’re working with a bigger bucket of cash rather than piecemealing with random scraps of cash. In the latter scenario, I would probably be more tempted to buy yet another Hoola stick from Benefit that will most likely end up breaking in my handbag like they always do—who feels me on this?!
We’ve all been there, right? It’s easy to fool ourselves into thinking “it’s only $30, I won’t miss it.” But the money from each little odd job adds up and can become a sizable chunk over the course of an entire month. That’s why sticking it into next month’s budget and taking a little longer to noodle on how you want to put it to work makes a whole lot of sense.
Three-paycheck months: I’m paid every other week, so I budget my lifestyle on the assumption that I’ll be paid twice a month, and everything fits together well and within my means based on that figure. But for those of us paid every other week, we have two months per year where we actually receive three paychecks. And it feels like MAGIC. I tend to think of this as free money even though I earned every single penny. Mostly, when these three-check months happen, the money ends up in most of my various sinking funds (more on this below). And okay, if I’m being honest, I may sprinkle a little more into my monthly operating budget because I’m low-key obsessed with Target.
Annual bonuses: Most companies I have worked for offer some sort of a merit-based performance bonus once a year. Although it’s difficult to predict what that can be year-over-year, the added cash is always a nice gesture. Because this is completely unpredictable for many of us, and definitely not a given, it isn’t safe to depend on it. Thus, I never put bonus dollars in my budget until I see it come through in my bank account and I know for sure it’s mine.
Give that “extra” cash a job before you spend it
On a good month with extra cash flow, one of the first things I do is identify which of my sinking funds I want to contribute to, and because I am somewhat of a psycho (you’ll know this immediately if you ever catch a glimpse of my color-coded Excel-based budget), I have many sinking funds.
What’s a sinking fund, you may wonder? It’s a sum of money, separate from your budget or emergency fund, that you use to gradually save for things that are important to you or just for larger expected but irregular expenses — for a lot of people, this is a car insurance premium that’s only due twice yearly. I may not touch this money right away, but it’s nice to know it’s there, growing and ready to fund larger purchases like the trip to Paris I will be taking later this year.
To recap, I budget with my regular income, giving every dollar a job, then allow my irregular funds to accumulate into various sinking funds. Using this method, here’s a glimpse of what all my savings and budgeting looks like:
- Down payment fund: For me, it’s important to be able to lay the groundwork for buying a house when I’m ready. And through my diligence and budgeting and sticking to plan for my money, I have nearly reached my goal.
- Emergency fund: Mine is ready to roll but I hope to never need it.
- Travel fund: My vacation payout compensation went directly into my travel fund, and okay, maybe a little to my wardrobe because I’m for sure going to need to look Paris chic, which I expect will require a fancy new red lipstick, some sort of hat, and a selection of striped tee shirts. Let’s not kid ourselves. These are practically line items in my June 2020 budget and I am ready for them, which is why I also have savings for wardrobe.
- Lifestyle cushion: Chelsea often talks about saving money by using public transit rather than Ubering around. Where I live in Philadelphia, it’s a little tricky to around via public transit, and I don’t have a car in the city. So I like to give myself an extra cushion to permit myself more in my transportation budget. Safely getting home at night feels better when I have more cash in that line item in my budget. I will also put a little more into my grocery and dining out categories, and to my wardrobe sinking fund.
- Income taxes: Freelance and side hustle income aren’t exempt from taxes, people! Always set aside a reasonable percentage to fork over to the IRS when tax season rolls around. (And if freelance work is how you earn the majority of your income, don’t forget to pay your estimated quarterly taxes)
- Gift budget: This is one of the other places I’ll stash some of my side cash. It’s important since we’re all getting older, and these birthdays won’t quit.
- Medium-term sinking fund: This includes random things I’m saving for, like buying a Roomba, which is currently my ultimate life goal. And one day — one glorious day — I’ll buy a fancy rug that my cat definitely won’t throw up on.
This method allows you to plan out your activities and make decisions with no stress since you have more time to contemplate what your next four weeks will look like. Having a plan for your income is crucial. You’ll be able to allocate your funds before the new month rolls around, bringing with it a nice, clean budget. Staying zero-based and budgeting with last month’s income allows you to give every dollar an important job while still planning ahead.
Jennifer Kuhn is a publisher, editor, and writer with very strong opinions in support of the serial comma. Her work has appeared in various publications, including Thought Catalogue, USA Today College, Signature Magazine, and many others. She is obsessed with Philadelphia, her adopted city since 2018, and tiny desserts. Instagram: @stragglez3.
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