Budgeting with irregular income: the baseline-month method
A calm way to budget when every month pays differently. Find your baseline month, build a buffer, pay yourself a steady amount, with a worked example.
By Thendoo team · · 6 min read
Standard budgeting advice starts with “take your monthly income”. If you freelance, run a small business, work on commission or pick up seasonal shifts, that sentence already doesn’t fit. Your income might be 6,000 one month and 1,800 the next. Budgeting from either number gets you into trouble.
This post describes one method that many people with uneven income use in some form: separate what you earn from what you live on, with a buffer in between. It’s a way of organizing money, not financial advice. Your situation, especially taxes, debt and savings goals, is worth talking through with an accountant or a qualified financial adviser.
Amounts below are plain numbers. Read them in whatever currency you use.
The core idea: a pipe and a tank
Picture your income flowing into a tank (a separate account) instead of straight into your spending. Each month, a fixed amount flows out of the tank to your everyday account, like a salary you pay yourself. Good months fill the tank; lean months draw it down. Your everyday spending sees the same number every month.
You need three numbers to make this work: your baseline month, your buffer target, and your own salary.
Step 1: Find your baseline month
Your baseline is what a month costs when you keep things lean but livable. Not your most frugal month ever, and not your average. It’s the amount you’d need to get through a slow month without stress.
List your costs in three groups:
- Fixed essentials: rent or mortgage, utilities, insurance, phone, minimum debt payments, childcare.
- Variable essentials: groceries, transport, medicine. Use a realistic figure from the last three months, not a hopeful one.
- Annual costs, divided by 12: car insurance, professional memberships, software renewals, the yearly dentist visit. These are the ones that ambush irregular budgets.
Add them up. That’s your baseline month.
Worked example
Dana is a freelance translator. Her last six months of income after business costs: 5,200, 2,100, 3,900, 6,400, 1,700 and 3,300. That’s 22,600 in total, an average of about 3,770 a month, but no single month looks like that.
Her baseline month:
| Group | Monthly amount |
|---|---|
| Rent and utilities | 1,450 |
| Insurance, phone, minimum card payment | 310 |
| Groceries and household | 520 |
| Transport | 140 |
| Annual costs (1,080 a year ÷ 12) | 90 |
| Baseline month | 2,510 |
Step 2: Set aside what isn’t yours first
Before any of this, carve off money you’ll owe. For most self-employed people that means income tax and any social contributions, and sometimes sales tax collected from clients. Move that share into its own account the day a payment lands, so it never looks like spending money.
How much to set aside depends on your country, your income and your structure. Ask an accountant for the share that fits you. Dana’s accountant suggested a figure for her; the income numbers above are what’s left after she moves it.
Step 3: Pick a buffer target
The buffer is how many baseline months the tank holds. A common starting point is three months. If your income swings a lot, or a single client pays most of it, more makes sense; if you have a partner’s steady income, less may be fine. This is a judgment call, and again worth discussing with someone who knows your full picture.
For Dana, three months: 3 × 2,510 = 7,530.
You probably don’t have that today. That’s normal. The next step works while the tank is filling.
Step 4: Pay yourself a steady salary
Choose a monthly amount to move from the tank to your everyday account. Start at your baseline month. Once the tank is full, you can raise it.
Dana’s rule:
- Every payment goes into the tank (after the tax share).
- On the 1st, move 2,510 from the tank to everyday spending.
- If the tank is above the buffer target on the 1st, move the extra into savings or goals, or raise her salary for the month.
How six months play out
Dana starts with 2,600 in the tank.
| Month | Earned | Tank after earnings | Salary out | Tank at month end |
|---|---|---|---|---|
| 1 | 5,200 | 7,800 | 2,510 | 5,290 |
| 2 | 2,100 | 7,390 | 2,510 | 4,880 |
| 3 | 3,900 | 8,780 | 2,510 | 6,270 |
| 4 | 6,400 | 12,670 | 2,510 | 10,160 |
| 5 | 1,700 | 11,860 | 2,510 | 9,350 |
| 6 | 3,300 | 12,650 | 2,510 | 10,140 |
By month 4 the tank passes the 7,530 target. From then on, anything above it is surplus she can direct on purpose. The month-5 dip to 1,700 barely registers in her daily life: her everyday account got 2,510 as usual.
(The table leaves the surplus in the tank so the pattern is easy to see; in practice Dana moves anything above 7,530 out under her surplus rule in Step 5. It also counts each month’s earnings before the salary leaves. If clients pay late in the month, keep a little extra in the tank so the 1st never comes up short.)
Step 5: Decide what happens to surplus
Without a rule, a big month quietly turns into big spending. Write the rule down in advance. One example split for money above the buffer target:
- Half to longer-term savings or goals.
- A quarter to a “next equipment / next course” fund for the business.
- A quarter as guilt-free spending this month.
The exact percentages matter less than having them decided before the money arrives.
What to do in a long dry spell
If the tank drops below one baseline month, it’s time to look at both sides: trim the variable essentials for a while, and look at what work can come in sooner. Lowering your salary temporarily is a choice the method allows; it’s better to see that coming two months ahead than to discover it on the day rent is due. A monthly check-in, ten minutes with your accounts, is what gives you that early view.
A monthly check-in that takes ten minutes
- Update the tank balance and compare it with the buffer target.
- Look at last month’s spending against your baseline. If groceries ran 650, not 520, adjust the baseline rather than pretending.
- List the annual costs coming in the next 60 days.
- Move surplus according to your rule.
The month-end close template for freelancers turns this into a checklist, and the free budget calculator helps you add up a baseline month.
Tracking it in Thendoo
Thendoo’s Money module can hold this setup: separate accounts for the tank, everyday spending and taxes; monthly Budgets per category that show what you have spent against each limit, in soft orange rather than red when you go over; and Bills with reminders the day before they’re due (a week before for yearly ones). Transactions come in by quick add or bank CSV import; there’s no direct bank connection. Budgets don’t roll over unspent amounts between months, so the tank itself lives as an account balance, not a budget line.