budgeting on an uneven income farmers

How to Budget on an Uneven Income Part 1: The Seasonal Worker

In Budgeting Tips, How to Budget Series by Phil McGilvrayLeave a Comment

Living on an uneven income does add some complexity to budgeting however with the right system and a bit of discipline it does not need to be difficult.

Uneven incomes can be broken into the following two categories:

The seasonal worker – This sort of income is typical in industries such as farming and tourism where income comes in lumps followed by long periods of little or no income.

The penalty rate worker – The first type of ‘uneven income’ occurs when you work shift work or in a job that includes overtime penalty rates. In these cases you typically have a regular baseline or minimum income that you can rely on. What you can’t be sure of is how much you will get over and above this minimum income in any one pay period.

In this blog I will be discussing the strategies of how to budget on an uneven income. We use this approach when working with seasonal workers to help get them set up manage their money.

The example below demonstrates how a seasonal worker who earns most of their income during the summer months would go about living to a budget.

Month Income Monthly Budget Surplus/Deficit Savings Balance
January $8,000 $3,000 $5,000 $5,000
February $8,000 $3,000 $5,000 $10,000
March $4,000 $3,000 $1,000 $11,000
April $3,000 $3,000 $0 $11,000
May $1,000 $3,000 -$2,000 $9,000
June $1,000 $3,000 -$2,000 $7,000
July $1,000 $3,000 -$2,000 $5,000
August $1,000 $3,000 -$2,000 $3,000
September $1,000 $3,000 -$2,000 $1,000
October $1,000 $3,000 -$2,000 -$1,000
November $2,000 $3,000 -$1000 -$2,000
December $5,000 $3,000 $2,000 $0


Across the full year this person earns a net income of $36,000, this equates to an average monthly income of $3,000. However as you can see their income fluctuates anywhere from $8,000 / month in summer to $1,000 per month during the colder months.

Based on the full year’s income we know that we can at most afford $3,000 month, of course if we want savings at the end of the year we need to spend less than we earn.

But to keep this example simple we have assumed that we have $3,000 per month.

You can see during the good income months we discipline ourselves and live to $3,000 which results in surplus funds of $5,000 in January and February and $1,000 in March.

These surplus funds are squirrelled away into our savings account during the good months, giving us a savings balance of $11,000 before the leaner months hit.

In April we have no surplus but from May through to November we earn less than the budgeted $3,000/month and draw back from savings to top our monthly income up to the $3,000 we need to maintain our budget at break-even.

In October and November you can see that our budget does actually fall into deficit because we hadn’t accumulated enough funds in savings before we hit the leaner months. There are three ways to avoid this happening:

1)      Firstly, the ideal time to start the budgeting process for a seasonal worker is at the very beginning of their higher income months. So if this budget had started for the first time in December instead of January we would have had the $13,000 in savings before the leaner months has started and therefor would have avoided falling into deficit. However that is very idealistic and I don’t believe we should ever wait to start the budgeting process because there are always benefits to getting started today.

2)      The second and preferred option is that we budget to a slightly lower income, after all the point is to try and save money. So instead of basing our budget on $3,000/month which is using all our income, instead use $2,800/month. Not only will this mean we are saving $2,400 across the year but our cash flow would look something like this:

Month Income Monthly Budget Surplus/Deficit Savings Balance
January $8,000 $2,800 $5,200 $5,200
February $8,000 $2,800 $5,200 $10,400
March $4,000 $2,800 $1,200 $11,600
April $3,000 $2,800 $200 $11,800
May $1,000 $2,800 -$1,800 $10,000
June $1,000 $2,800 -$1,800 $8,200
July $1,000 $2,800 -$1,800 $6,400
August $1,000 $2,800 -$1,800 $4,600
September $1,000 $2,800 -$1,800 $2,800
October $1,000 $2,800 -$1,800 $1,000
November $2,000 $2,800 -$800 $200
December $5,000 $2,800 $2,200 $2,400


Because we are saving more and taking out less our budget balances well even through the leaner periods.

3)      The final thing we can do is if we have some savings somewhere else or have something we can sell, we can buffer our savings account from the start in anticipation of those weaker months where we may fall into deficit. It can be hard to find additional savings but the good thing is you will only need to do it once. Once we have the balance of the savings account at the right level to start with, the flow of money in and out of the account will balance itself every year from then on.

At Grandma’s Jars we have several seasonal workers who have found great relief in applying this method of budgeting to the finances. It’s not easy to budget on an uneven income especially when some months the money seems to flood in and others it’s barely a trickle. The key is to build your budget around a monthly figure you know is sustainable and then have the discipline to stick to it both through the good months and the tough months.

Please keep an eye out for my next blog which will look at budgeting on a ‘penalty rate’ income.

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