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How to Budget When You’re Self-Employed


Are you currently self-employed? Or, would you like to be self-employed someday? What do you think the income would be like? If you are the typical dreamer, you may answer the latter question with, “The income would be huge!” or, “The income would be more than enough.” For some reason, self-employment is perceived as success and wealth, when in reality, many self-employed individuals need to budget, just like you and me.

When I consider my own question about self-employed income, I would respond with, “sporadic” or, “stressful”. Income is not guaranteed when you give up your desk job. Suddenly, you might depend on one big deal just so that you can feed your family this month! It’s not all fun and games.

My Experience With Self-Employment

While I am employed (by a wonderful company I might add), I can still relate to self-employment through my wife. Her main source of income is through an entrepreneurial company, but it is inconsistent since she is contracted and gets paid per project. Her other source of income is through photography, which is very erratic when it comes to scheduled shoots and payment.

Quite honestly, we never really know when the next check is coming in the mail, which makes budgeting a complete nightmare!

My Attempts at Budgeting

Initially, I attempted to predict what projects my wife had lined up for the month, and then based the overall payment on the projected projects. Seemed straightforward enough, right? Well, after about a week, this method was a bust. Projects fell through and new projects were added out of the blue. I could not budget with this method.

The second attempt was a variation of the first; I decided to look back on the previous months and take an average of her previous monthly payments. I would then use that average for my wife’s income in our monthly budget. This obviously wouldn’t give me an exact budget, but I was hoping it would get me close.

Well, I soon learned that my wife’s income was seasonal. She would make a little less in the summer than she would in the winter, so that method was a bust as well. It got me nowhere close to the actual income amount at the end of the month.

Finally, I decided that since we more-or-less live off my income anyway, I would merely treat her income as extra, and budget it for other various expenses. This is what gave me the idea for the self-employed budgeting technique!

The Budgeting Method That Works For the Self-Employed

If your family depends on a 100% self-employed budget, here are the simple steps to follow in order to make it work.

  1. Find your lowest income month within the past year and use that for your maximum monthly expenses allowed
  2. Budget each of the expenses that occur monthly within this low-income amount. This should include all of the essentials – food, rent/mortgage, car expenses, tithing, 10% investments etc. If you feel that you cannot squeeze investments in this budget, you may save it for the next step.
  3. Create an additional budget “bucket” for the times where you receive more than your budgeted income amount (this should happen often since you’re basing your budget on your lowest-income month). Within this “bucket”, you should list (from most important to least) how you will spend the remaining money.
    • For Example:
      • Investments (20% of remaining money)
      • Long-Term Expenses (ie. Car insurance that is due every 6 months) – up to $300/mo.
      • Recreation – up to $100
      • Out to Eat – up to $100
      • Any remaining toward Long-Term Saving and Investing
  4. Repeat this method monthly and tweak the list as you go. It’s fairly straight-forward and will be a helpful tool in your budget!
Self-Employed Budget
My attempt at graphic design without my wife's help...

I know the example is fairly simple, but I hope you get the picture. By laying out this method for your self-employed income, you can live without the stress and uncertainty of self-employment!

What do you think of this plan? Do you feel like you could implement it and benefit from it?

Budget Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. This is a good way to budget. The worst thing about self-employment is paying the self-employment taxes.

    • Those taxes can sneak up on you when you don’t pay them regularly. Thanks for the comment!

  2. If self employment is erratic, this may be the only way to budget. Public companies go through this too, they have better cash flow. Over time, you can adjust to be more accurate.

    • Yep yep. It’s tough for small companies, but over time, it should be a little more consistent.

  3. Great post! This is kind of how we budget, too! I like the tips about the additional bucket, though. Right now we put the extra self-employed income toward savings, but we may be better off further budgeting that new bucket 🙂

    • Sounds like you’re doing great Christa! It always great to hear or people that are actually budgeting their money and putting a portion of it to savings. 🙂

  4. My current plan is to quit my day job in mid-September and pay myself a biweekly paycheck just like I received at work. I contribute all of my online income profits to a special account and will continue to do so. That account is at $7500 and will be at more than $10,000 by the time I leave my day job. I will be paying our tax account and myself $1500 biweekly so that all of our bases will be covered. If I do not make $3000 in a single month, the padding will cover it and when I make more than $3000, the padding will grow back. This is my basic plan so far.

    • Great plan Crystal! You are always inspiring and I hope to follow in your shoes someday! 🙂

  5. You just give me an idea on how to budget. I am self employed and don’t know how to handle my finances.

    • I’m glad I could help! It took a few failures to figure this method out, but it’s now working great! 🙂

  6. Derek – Can you shoot me your e-mail? I lost it and am building a list. Thx

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