Budgeting on an Uneven Paycheck

Some people get a set paycheck every month, but for many people it fluctuates depending on how much they worked that month, overtime, holidays etc. How do you budget when your income changes all the time?

The most important thing is to budget, budget, budget. Make sure that you are making smart choices with your money, especially in months when you make more.

It may seem daunting but I created a pretty simple system for myself.

  1. Add up all your monthly bills. Round up.
  2. When you get your paycheck-deduct 10% for charity (Maaser). I try to be careful to always include charitable giving in my budget. Although I don’t make much, it is important to keep on giving to others regardless.
  3. Deduct 15% (or 30% or 50%!) for savings. Put this in your savings ladder.
  4. Deduct your bills from this amount.
  5. Decide on a percentage for all variable categories (clothes, spurge, coming soon etc.) to put in your envelopes.  For example,  I usually use 10% for each. Deduct that amount from your paycheck.
  6. The amount that you have left over is for food and discretionary spending. If this amount is too small than lower your contribution to your other variable categories.
  7. If you have paychecks that are truly feast or famine (some months you make significantly more and some months you don’t even make enough to cover bills you will have to put extra in feast months into your bills and food accounts. It will take a lot of self-control and planning but it can be done!

The easiest way to calculate where everything goes is to use an Excel spreadsheet. Simply set it up with your desired percentages and your total bill amount, and then every month put your paycheck amount in and Viola! Each amount is calculated for you. I have attached a sample excel spreadsheet here. Play around with it and work out which numbers work best for you!

Budgeting with an “Envelope” System

How do you decide on where to put your money? You want to save but you also want to live a little. Don’t forget bills! And what do you do with expenses that you are anticipating?


Here is a basic budgeting system:


The best way to budget your money is to decide before you receive it where each dollar will go.  This is a combination of various budgeting system- and it works!


This is a cash budget which means that you can only spend money you actually have. Some financial advisors will tell you to only use actual cash or direct deposits but I see no harm in using a credit card AS LONG AS THE MONEY NEEDED TO PAY FOR IT IS ALREADY IN YOUR ACCOUNT. I still recommend, unless you are great at self-control and are very good at keeping on top of the amount in your account, to use cash for discretionary spending- food, splurges etc.


The best way, in my opinion, to keep track of your money is to divide it into separate categories as soon as you get it. Some will tell you to take out the money and put it in a labeled envelop, hence the term “Envelope system” but in the modern era I suggest you open several sub accounts and just deposit the money in there.


CapitalOne360, (https://captl1.co/2vl8R8a) for example, allows you to have many savings accounts that can be named whatever you want and can be accessed easily from your computer or phone. You can transfer money directly from your main checking account, so it’s easy to divide your paycheck. However, you can only withdraw 5 times a month from each savings account so keep track. If you do put purchases on your credit card, pay a bunch at a time, instead of each individual transaction so that you don’t use up your withdrawal limit.


Each person will have their own categories but here are some basic ones that I will discuss:





Coming soon





Basically, you divide your paycheck every month (or 2 weeks) into these categories and transfer them into the corresponding accounts. Some will be a fixed amount monthly and some will percentages.


So… this is how it works….


Maaser (Charity)- 10% right off the top. No need to think about this one. Put it another checking account or savings account and you can give it out as needed.


Savings- This should be approximately 15% of your paycheck but you should try to make it as high as possible, especially if your bills are low. It should definitely be more than your splurge or clothing account. You take this money and put it wherever you are on the Savings Ladder. (If you are working on emergency, you put it there, if you are up to retirement you put it there etc.)


Bills- Take all your bills and add them up. If they sometimes fluctuate round up from an average month. Put that amount in your bills account. If there is leftover at the end of the month, it rolls over so when your electricity bill is higher in the summer, you have some extra money in the account to cover for it. The best part of this system is that when you get a bill you already have the money in your account to pay for it. No playing catch-up!


Transportation- Take your gas bill or bus costs and figure out how much you spend approximately each month. Put that amount each month into an account and roll it over if there are leftovers. This makes sure that if one month you use more gas than you have extra money in the account to pay for it. If you have fixed transportation expenses, i.e. bus card, then you can use combine this with your bills account.



Car- If you own a car you should also put some money in for car maintenance. If you put in a small amount each month then when you need maintenance done on your car then you will have the money for it. Car problems don’t need to mean an emergency. (Although I am using a car as an example here, you can set up accounts for anything that you have that needs regular care).


Coming soon- This is the account that is for very short terms savings. You can also call this a holiday account. This is for things that come up every once in a while but not regularly. Examples are holidays, birthdays, weddings, and semi-big purchases that you will need or want, ex new computer or phone.


Clothes- This is the same idea as the “Coming soon” account. Put aside money each month for clothes, shoes and accessories. Although you may not shop each month, the money rolls over so you can shop freely when you want. This can also help you take advantage of sales- during an off-season you can buy clothes on sale without guilt because you have the money put aside for it!


Food/Discretionary- This account is for all the food, toiletries and day-too-day spending. This money can stay in your checking account because this is the money that you are spending every day. Again, if you have leftover money, roll it over into the next month.


Splurge- This is the last account to be filled and the first one that gets cut out when things get tough. Obviously, each person will have a different idea of what gets paid from the splurge account, but this is the account for fun.


These are just examples of some of the accounts that I have (I also have one for property taxes and building fees, as well as some others) and each person will decide which accounts or envelopes they need. You may have accounts that change over time and you may need new ones as your needs evolve. The point is to have money to cover all your expense and anything that may come up. Planning for events and purchases that are bound to come up will leave you with security in knowing that the money you need is set aside.

Read more here about budgeting with an uneven paycheck.

Setting Up Your Savings Ladder

Where do you put the savings portion of your paycheck? What do you do with the money you have made so far that you don’t know what to do with?

Welcome to the savings ladder. The process is simple; when you complete one step you simply move up the ladder and do the next step. If you need to take money out of a ladder step, climb down one and start over.

This post contains affiliate links, which means I receive compensation if you make a purchase using these links.

Follow these five simple steps:

Emergency Fund-Put away $1,000 in an emergency fund. This money should be accessible to you in times of emergency. It can be in a checking account or a simple savings account. You do not want it tied up in something that takes a while to withdraw or has penalties for withdrawal. This money is for emergencies only! Anything that can be foreseen is not an emergency (friend’s wedding, new clothes etc.) Hopefully, you will never touch this money- but if you have to immediately replenish the account so it has $1,000 in it.

Here is an example of an easy account to open: https://captl1.co/2vl8R8a

Retirement- Take $5,500 and put in a Roth IRA (or SEP IRA if you are self-employed). Why do I suggest putting money away for retirement as the second step? There are 2 reasons for this:

Compound Interest- the earlier you put in money the more it grows and accumulates interest.

Usually, when things get tough (as they usually do) the first thing people do is lower their long-term saving contributions. By putting this money away now you are making sure that at least you have some form of long-term savings put away. The way to financial plan is to assume that later in life you will have less money, not more. That way if that is true you have planned appropriately. If you do have more money later in life- you will just be richer.

The easiest way to do this is to open a Targeted Retirement Account. Pick an account that allows withdrawals in the year you plan to retire (at age 59 1/2) and max it out every year as soon as possible. The maximum contributions are $5,500 for someone filing taxes independently. Keep in mind that just like all investment options -there are pros and cons to these accounts. In my own personal opinion, these are the easiest to “set and forget” for the uninitiated investor who needs to set up a retirement account- which you should do as soon as possible- COMPOUND INTEREST. So yes, if you are 18 year old, it’s not too early to start thinking about retirement.

Some accounts need a large minimum deposit in order to open. If you don’t have that kind of money, simply open a savings account such as Barclays or Ally and deposit the money in there. Once you reach the minimum deposit amount you can open your account.

I am not an expert on investing- so I won’t tell you what to do besides to open the account. But here are some links to help you get started!

Vangaurd Target Retirement Fund: https://investor.vanguard.com/ira/iras
Vanguard SEP: https://investor.vanguard.com/what-we-offer/small-business/overview

3-6 Months savings- Take all your expenses and multiply that by 6, or take only the bare minimum and multiply by 3. This is the amount that you need to have in this account. This savings should also be fairly easy to access. A simple savings account should do the trick. No CD’s or mutual funds. You are not going to make money off this account- you just want it there when you need it. Of course, if you can put it in a savings account that pays interest that will just work in your favor!

Capital One 360 works for this also: https://captl1.co/2vl8R8a
Barclays Bank- https://www.banking.barclaysus.com/index.html

Intermediate Savings- What are your upcoming big expenses? Finishing your degree? Going to graduate school? Will you need to pay for a wedding? If none of these apply than you can just start putting money away for a house. This account should be a money-making account but you don’t want something too risky. A good mutual fund should do the trick. You want the money to work for you but you don’t want to take too many risks as you may need the money in the near future. Even if you don’t it’s a good idea to have money in an account that makes money but is not too risky. The amount that you out in this account will vary based on your needs.

Vanguard Star: www.vanguard.com
Or check www.bankrate.com to compare different options.

After that- You have enough for school? For a wedding? For a down payment on a house (or getting there)? Start diversifying. Put your savings money in different brokerage accounts, mutual funds, CD’s, start trading etc. Never put all or most of your money in one place and don’t invest more than you can afford to lose.