Variable expenses can be a budgeting hassle. The fact is that we all have expenses that vary form month to month. It is impossible to know exactly what everything will cost, but it is such a hassle to try to maintain a balanced budget when dealing with variable expenses.

The first step in dealing with variable expenses is to find the average of that expense. When dealing with utilities it can help to find an average for the different times of year. For example, your electric bill may be $50 in the summer, but $150 in the winter. However you choose to do it, just get an average amount that you can use each month to plug in for that expenses cost.

You can put in the average as the amount for the expense and then once you get the actual bill you can change it to reflect the actual expense amount. You should allow some flexibility for your budget so that you can keep your budget balanced once you put in the actual expense amount.

There are other variable expenses, too, that you need to think about. Unexpected expenses or special expenses are something that can really damage your budget and put it out of balance. In order to be able to handle unexpected expenses you have to plan ahead. This is where your savings comes in. Do not forget to put savings into your budget every month.

Variable expenses do not have to be a budget breaker. You know that expenses can vary for many reasons, whether it is based on usage or just the rise in the cost of things. You can not expect to have a perfect budget where you know exactly what everything will cost every month.

Part of budgeting is being able to handle variables. If you are budgeting correctly slight changes and the occasional surprise should not be a big deal. You should be able to deal with it. That is of the utmost importance. Do not let your budget become a headache just because something changed form last month’s budget.

Figuring variable expense in budgeting is something you have to do. It is highly unlikely that you know exactly what each expense will be forming month to month, however. By using averages you can at least get an idea and be prepared for the most part. Don’t give up on budgeting just because it can be challenging. Your personal finances are too important o just abandon when things get tricky.

Having a budget is the foundation of managing your money. Making budget is easy when you have a dependable income that’s the same every month. But what do you do when your income varies from one month to the next? This is the case for many contractors and freelancers. Your expenses remain the same, but your income doesn’t. You still need a budget and you can make one. You have to go about it differently.

Total your expenses

When you’re making a variable-income budget, start by totalling your income as you would if your income was fixed. Add up the things you spend money on every month. This includes rent/mortgage, utilities, car note, car insurance, health insurance, life insurance, phone bill, loan payments, credit card payments, and taxes. You should even calculate how much you’ll spend on variable expenses like gas and food.

Average your income

If you had a variable income last year, too, use your last tax return to come up with an average monthly income. Just divide your gross income by 12 to come up with an average monthly income. If you don’t have a year’s worth of income, average the months you have. For example, if you’ve been freelancing or contracting for 7 months, add up the last 7 months of income and divide it by 7. This will give you an average income to base your budget on.

Does your average monthly income exceed your expenses?

Your average monthly income needs to meet or exceed your expenses. If not, you’re going to run into a cash flow problem. Adjust your expenses to fall below your average monthly income. Some examples of places you can cut back are: gas, food, utilities (save on electricity), and entertainment. For more ways to cut your expenses, go through each category and decide whether it’s a need or a want. Wants can be cut out.

Your budget in practice

You’ll need to have at least three accounts – one checking account and two savings accounts.

The checking account will hold your monthly income that you use to cover bills and other expenses.

One savings account will hold your income then be used to “pay” yourself at the end of the month.

The other savings account will be for savings. You will only deposit money into this account. You will never withdraw money from it unless it’s to invest it in a higher interest rate account.

Start your budget at the beginning of the month. Your checking account needs to have enough in it to cover your expenses for the month.

As you get paid throughout the month, put the money into Savings Account #1. You shouldn’t have to touch your savings account during the month. If you do, then you didn’t budget enough for your expenses or you’re overspending (or you ended up getting paid less than average, see below). At the end of the month, around the 28th, transfer $2500 (or what you need to cover your expenses) into your checking account.

Less than average months vs. higher than average months

When your income varies, some months will be less than average and some will be higher than average. Once you’ve been using this variable-income budgeting method for a few months, you won’t notice the ups and downs of your budget as much. The surplus months will build up your savings account to help offset the “famine” months.

However, if you experience a “famine” month in the first 1-2 months of using this variable-income budgeting method, you might have trouble meeting all your financial obligations. In this case, you have a few options. Cut back on some of your expenses (the best option). Pull from your emergency fund (which ideally has 6-12 months of living expenses). Pull from your savings (only when options 1 & 2 don’t work).

Don’t let a famine month discourage you. Like I said earlier, once you have a couple of months where your income is at or above your average income, your savings will build up and the bumps will smooth out. Give it six months and you’ll be happy you did.

Budgeting is one of the earliest and most important aspects of personal finance. The basics of budgeting is simple. However, each persons financial situation is different so a one size fits all sort of budget plan does not work for everyone.

If you are a person who has an income that is not always the same, the standard budget can be a little hard to maintain. The following are some great tips for how to manage budgeting when you have a varying income.

1. Try to keep an average income to work with. If you can come up with an average income, either an actual average of your income or the minimum amount you can make, if know, then use that as your income on your budget.

2. Learn to be flexible. You have set expenses and then you have variable expenses. Learn to be able to adjust your variable expenses to meet your income so your budget is always balanced.

3. Keep on top of things. You should always look over your budget each month, but with a varying income, you need to do this often. This will allow you to stay on top of your budgeting and ensure you are keeping things in check.

4. Know the bottom line. You should always know that magic number – the amount of money you must have every month. Once you reach your magic money that will meet your basic needs then you can rest easy knowing you have the needs met and now you only need to worry about working with what you have left.

5. Try a weekly budget instead of a monthly budget. You may need to work your budgeting into a weekly plan. To do this, take the amount you must have and divide by four. This is what you must have each week in order to meet your expenses for the month. This will be put back immediately. Then you can budget out your expenses for each week. This may help if you are paid each week.

Budgeting with a varying income can be difficult. It can take some time to develop a style and method that works best for you and your situation. Do not forgo a budget, though, because it is too hard. A budget becomes very important when you can not count on a certain income each month. It will help you to stay in control of finances, so work at it and stick with it.