How to Create a Freelance Budget That Actually Works With Irregular Income

Traditional budgeting advice doesn’t work for freelancers. “Spend 30% on housing, 15% on food, 10% on savings.” Great — 30% of what? My income was $3,200 last March and $14,000 last July. Thirty percent of which number am I budgeting with?

The answer — and this took me 18 months of financial stress to figure out — is neither. You don’t budget based on monthly income. You budget based on a system that smooths out the chaos.

The System: Salary + Buffer

I covered the mechanics in my cash flow article, but here’s the budgeting layer on top:

Step 1: Set a fixed monthly salary from business → personal Mine: $4,500/month. This is what I have to work with for all personal expenses. Period.

Step 2: Budget that fixed salary like any employee would

The 20% buffer absorbs surprises — unexpected car repair, a friend’s wedding, random life expenses. If I don’t use it, it rolls into personal savings.

Step 3: Business expenses are budgeted separately

These come from business checking, not my personal salary.

The First Year: Before You Have Data

If you’re new to freelancing and don’t have income history, you can’t calculate a reliable salary yet. Here’s the survival budget:

Month 1-3: Bare bones

• Calculate your absolute minimum monthly expenses (rent, food, insurance, essentials)
• This is your “survival number” — mine was $2,800/month
• Every dollar above survival goes to building your buffer and tax savings

Month 4-6: Stabilizing

• You now have 3-6 months of income data
• Calculate your average monthly income after taxes: Monthly average × 0.72
• Set your salary at 80% of this number (the 20% gap builds buffer)

Month 7-12: Normal operations

• Buffer should be 1-2 months of salary
• Adjust salary based on 6+ months of real data
• Start adding non-essential budget categories (fun money, savings goals)

The Budgeting Tools I’ve Used

YNAB (You Need a Budget) — $14.99/month

I used YNAB for 2 years and it fundamentally changed how I think about money. Its philosophy — “give every dollar a job” — is perfect for irregular income because you budget money you HAVE, not money you expect.

When a $5,000 payment hits, YNAB asks: what does this $5,000 need to do? $1,400 to taxes. $664 to business expenses. $4,500 to personal salary (if the month’s salary hasn’t been funded yet). Any remainder sits in the buffer.

Pros: Best approach for irregular income, forces intentional spending, age-of-money metric shows financial health Cons: $14.99/month, steep learning curve (took me 3 weeks to “get it”)

Google Sheets — Free

After 2 years on YNAB, I switched to a simple Google Sheet because my habits were established and I didn’t need the app’s guardrails anymore.

My sheet has: Monthly income, fixed salary transfer, business expenses, personal budget categories, and running buffer balance. Takes 15 minutes/month to update.

Monarch Money — $9.99/month

A newer budgeting app that handles irregular income well. I’ve heard good things from freelancer friends but haven’t used it personally.

Budget Mistakes Freelancers Make

Budgeting based on a good month. You made $14K in July, so you budget like you’ll make $14K every month. Then August comes in at $4K and you’re screwed. Always budget conservatively.

Not budgeting for taxes. This isn’t a budgeting category — this is an automatic transfer that happens before budgeting begins. Taxes come off the top, always.

Treating business revenue as personal income. $8,000 in freelance revenue is not $8,000 in spending money. After taxes (28%), business expenses (~$700), and savings, your actual spending money is about $4,500.

No fun money. Budgets without any discretionary spending are diets without any treats — they work for 3 weeks and then you binge. Budget $200-300/month for whatever makes you happy. This prevents the “I’ve been so responsible, I deserve that $800 gadget” impulse.

Not adjusting. Review your budget quarterly. If you consistently have $300 left in groceries, reduce it. If you consistently overspend on transportation, increase it. A budget is a living document.

The Annual Budget Review

Every January, I review:

• Last year’s actual income → Adjust salary up or down
• Last year’s actual expenses → Adjust budget categories to match reality
• Buffer health → Should be 2-3 months of salary. If less, reduce salary. If more, consider increasing salary or redirecting to retirement.
• Rate increases → Did I raise rates? Budget should reflect any income growth.
• Goal setting → What financial goals for this year? (Build emergency fund, max retirement, save for vacation, etc.)

This review takes about an hour and sets the financial framework for the entire year.

The Bottom Line

Freelance budgeting works when you decouple your spending from your earning. Pay yourself a fixed salary, budget that salary normally, and let your business account absorb the income volatility.

The system: 28% to taxes (automatic), business expenses from business checking, fixed salary to personal, budget the salary, buffer absorbs the chaos.

It’s not exciting. It’s not Instagram-worthy. But it works. My financial stress went from constant (year 1) to minimal (year 3+). That stability — knowing I can cover my bills regardless of whether it’s a $4K month or a $14K month — is worth more than any budgeting app or financial hack.