Good money management comes down to two key principles: awareness and control. Awareness means understanding your financial situation—knowing where your money comes from, what your expenses are, and what it takes to meet your needs.

Control is about making deliberate, thoughtful choices with your money that will take you one step closer to where you hope to get. While this can be challenging for anyone, it’s especially difficult when you’re living with unpredictable income. The uncertainty can be overwhelming, but with a clear plan and consistent effort, you can create stability and take control of your finances.

Here’s a step-by-step guide to help variable income earners build awareness and take control of your finances.

Step 1: Cover the Basics

The first step is making sure you can consistently meet your survival expenses—the essentials you need each month to get by, like rent or mortgage payments, utilities, groceries, transportation, and minimum debt payments. Start by calculating this number; it’s your baseline for financial survival.

Next, determine your minimum reliable income, or the lowest amount you can realistically expect to earn in a month. For gig or hourly workers, base this on the minimum hours you typically work during slow months. If you’re self-employed, look at your lowest-earning month from the past year. For new businesses, your minimum might be $0, and that’s okay—it’s about being honest with yourself.

If you share finances with a partner, combine your minimum reliable income with theirs to calculate your household’s base earnings. This will give you a clear picture of your ability to cover shared expenses together, and ensure both of you are comfortable with the amount you need/are able to contribute.

Compare your minimum income to your survival expenses. Is it enough to cover the basics? If it is, you have a foundation to build on. If it’s not, you need a plan to bridge the gap. This might involve working more hours, finding additional income sources, or temporarily reducing nonessential expenses.

Without a plan, the constant uncertainty of how to cover basic needs can create ongoing stress and take a toll on your nervous system. Taking time now to address this gap and develop a strategy will give you a sense of stability and help you feel more in control of your financial situation.

Step 2: Plan for Taxes

If you’re self-employed or earn income from which taxes aren’t automatically deducted, be proactive and set aside a percentage of what you earn each month to cover them. It might be tempting to put off thinking about taxes, especially if you’re struggling to make ends meet, but leaving yourself unprepared for a bill you know is coming is a one way ticket to financial stress. Setting money aside consistently will allow you to stay in control and avoid the scramble to find funds when tax time arrives—making the process far less stressful. Consult a professional to help you determine how much you should be setting aside.

Step 3: Plan for Surpluses and Prioritize Financial Goals

Now that you’ve covered your basic expenses and set aside money for taxes, it’s time to decide how to handle months when you earn more than the bare minimum. A clear, tiered system for allocating surpluses ensures you can cover immediate needs, reduce financial stress, and invest in your future.

Here are a few ways you could allocate your surplus:

1. Build an Emergency Fund First: Start by putting extra income into an emergency fund until you’ve saved 3–6 months’ worth of survival expenses. This cushion will alleviate the pressure of micromanaging every dollar you earn, giving you peace of mind and flexibility during lean months or unexpected situations.
2. Give Yourself a Raise: Once your emergency fund is in good shape, increase your personal spending allowance to allow yourself to breathe and enjoy life more. This could mean dining out occasionally, upgrading something in your daily routine, or pursuing hobbies that bring you joy.
3. Pay Off High-Interest Debt: Use surplus income to pay down high-interest debt, which can free up cash flow and reduce the stress of monthly payments. This step not only saves you money on interest but also provides a sense of relief and progress.
4. Save for Future Goals: Allocate funds toward long-term priorities like retirement, education, or investments. Even if saving for the future feels distant, starting early—even with small contributions—harnesses the power of compounding investment income over time. Trust me, you’ll thank yourself later.

Example of a Tiered System

Your tiered system should start by addressing your most urgent financial priority and work its way toward less pressing goals. Here’s an example of how you might allocate surpluses:

— The first $200 goes to your emergency fund to build a 3–6 month cushion. This step is vital for reducing stress and giving you flexibility during income dips or unexpected expenses.
— The next $200 increases your personal spending allowance, giving yourself a raise to enjoy life a little more while maintaining balance.
— The next $200 is applied toward paying off high-interest debt, which reduces financial strain and frees up cash flow.

Any additional income is directed to investments or retirement savings, ensuring you’re taking advantage of compounding even with small contributions.

This is an oversimplified example. In reality, you’ll want to build your tiered system based on your specific goals, timelines, and financial situation. Adjust the order and amounts to reflect what’s most important to you.

Why This System Works

For variable earners, a tiered system brings structure to months with unpredictable income. By allocating funds in order of urgency, you stay on track toward your financial goals without having to make last-minute decisions. Tackling multiple goals at once, rather than focusing on just one at a time, keeps you moving forward on all fronts—emergency savings, debt reduction, and future planning—without losing momentum.

Step 4: Track Your Income and Expenses Regularly

Tracking your income and expenses is a key part of managing your finances, but it doesn’t have to feel like a chore. With a little creativity, you can make the process engaging and even enjoyable while keeping yourself accountable.

Here are some tips to get started:

1. Schedule it in your calendar: Treat your money review session like an important appointment to ensure it becomes a consistent habit.
2. Set the tone: Create a comfortable and relaxing environment. Put on your favorite background music, order your favorite meal or snack, or get cozy with a favorite beverage—whatever helps you feel in the zone.
3. Use a system that works for you: Color-code your spreadsheet for clarity, use a spending tracker app to save time, or jot down high-level points in a notebook—choose whatever approach gets you motivated and feels easy to stick with.
4. Reflect and plan: Take time during each session to review what you earned and spent last month, assess what you’re on track to do next month, and figure out how you’ll address any shortfalls or allocate surpluses in the months ahead.
5. Involve your partner: If you share finances, use this opportunity to communicate openly about your financial situation. Meeting regularly to discuss finances will help you maintain a team dynamic, and address potential issues before they evolve into bigger problems.
6. End with accountability: When you finish your session, schedule your next one in your calendar to keep the momentum going. Consistency is key to building financial confidence over time.

Tracking your finances doesn’t have to be stressful. By making it a habit and adding a personal touch, you can transform this essential task into a productive and even enjoyable part of your routine. Regular check-ins help you stay aware of your financial progress and make informed decisions moving forward.

Step 5: Celebrate Small Wins

Managing a variable income can feel overwhelming, so celebrate your progress. Break larger goals into smaller milestones—like saving one month’s worth of survival expenses toward your emergency fund—and reward yourself when you reach them. A small treat or activity can reinforce positive habits and keep you motivated.

Managing finances with a variable income can be challenging, but it’s not impossible. By building awareness, creating a plan, and following these steps, you can gain control, reduce stress, and set yourself up for success. Every small step forward is progress, whether it’s building your emergency fund, paying down debt, or celebrating a financial win.

Ready to take the next step? Start today by reviewing your finances, setting clear goals, and creating your tiered system for managing surpluses. If you’re feeling stuck or unsure where to start, reach out to a financial advisor (if that’s me, CLICK HERE) or explore tools that can support you on this journey. Your financial stability is within reach—let’s make it happen!