01/20/2015 10:30 am ET Updated Mar 22, 2015

How to Ride the Irregular-Income Roller Coaster

Irregular income can be a real roller coaster, especially if your are self-employed! I'll admit that that uneven paycheck ride sickened me a few times in the early years of running my business.

If you're self-employed, then you likely have irregular income. Let's face it: Budgeting sucks. So here are a few creative ideas on budgeting when some moths are flush while others are lean.

1. Open two bank accounts. One of these accounts will be for paying your everyday bills, so let's call it the spending account. The second account, called the overhead account, is the one that will come in handy. Deposit all your earnings here, then schedule regular transfers to your spending account once per month. That will smooth out the irregular checks and keep you honest.

2. Estimate a salary and stick to it. This can be a challenge. You may not have any idea what you'll make in the coming year. So estimate conservatively until you have a track record to go by. Once you do have the estimate, divide it by 12. Transfer that amount monthly to your spending account. I personally prefer paying myself every 12 months because that's the cycle for your bills, like utilities, rent, etc. If you prefer, you can pay yourself biweekly or even weekly; you'll just need to divide your annual amount by 26 or 52, respectively.

3. Protect yourself from the big dip on the roller coaster. There are going to be times, especially if you receive commissions, that you don't sell anything or earn a check at all. The hope is that you stashed enough in the overhead account to cover these periods. If you didn't, you'll just have to borrow from your savings account. (I learned about the overhead account from The Money Book by Joseph D'Agnese and Denise Kernan. You can read my review here.)

4. Here's what to do when you have some extra green. Self-employment can be feast or famine. That's why these strategies make so much sense. When you are in feast mode, your paychecks are exceeding what you need to run the business and pay your bills, so sock some away. If you are saving excess funds in the overhead account, when the lean days hit, you'll have that money to smooth out cash flow.

As a self-employed person, you have to be more disciplined than an employee. Nobody automatically deducts for retirement, taxes and insurance for you. So you have to make sure you don't sacrifice cash flow when you are feeling rich from a larger paycheck.

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