Most budgeting advice assumes a salary: the same amount, on the same day, every month. For freelancers, the self-employed, seasonal workers and anyone paid by the job, that assumption breaks on the first page.
Kakeibo, the Japanese household ledger, copes better than most methods, because it does not start from a fixed number. It starts from four questions, and the first one is simply: how much money is coming in this month? On an irregular income, the answer changes. The method does not.
Budget from the lowest month
Look back over the last twelve months and find the lowest month of income. Not the average. The lowest.
That figure is the base. Needs, the first of the four kakeibo columns, should fit inside it: rent, food, bills, getting to work. If they do not fit, that is worth knowing early, and it is the most useful thing the exercise will show.
Everything above the base is treated differently.
Pay yourself a steady amount
The calmest way to live on an irregular income is to turn it into a regular one. Keep a separate account as a holding tank. Every payment goes into it. On the first of each month, move the base amount from the holding tank to the everyday account, as if it were a salary.
In good months the holding tank grows. In thin months it pays the salary anyway. Kakeibo’s monthly plan is then written against a fixed number, which is what it was designed for.
The second question, asked twice
The second kakeibo question is how much would I like to save? On an irregular income it helps to answer it in two parts.
First, a buffer: enough in the holding tank to pay the base salary for three thin months. Until that buffer exists, it is the only saving that matters.
Second, once the buffer is there, a share of every good month. Decide the share in advance, a third, say, so that a large payment arriving is not a reason to decide anything new. It is already decided.
Keep the unexpected column honest
Irregular incomes come with irregular costs: equipment, software, a course, a tax bill that arrives once a year. Put each of these in the unexpected column as it happens, and at the end of the year read the column back. Most of what was unexpected will turn out to have been predictable, and next year it can move into the plan.
Taxes first
If no one is taking tax out of the income before it arrives, it needs to be taken out by hand. Move a fixed share of every payment to a separate account the day it lands, before it reaches the holding tank. The share depends on where you live and how you are taxed, and an accountant can tell you the right figure. The habit matters more than the precision.
The monthly review
At the end of each month, answer the remaining two kakeibo questions as usual: how much did I spend, and what is one thing I would change? Add one line for the holding tank: what came in, what went out, what is left.
After a year of these lines, an irregular income starts to look less irregular. The thin months tend to fall in the same places. The good months tend to repeat. The ledger turns into a forecast, and that is the point at which the anxiety usually goes.
A free month sheet. The Kakeibo Month Sheet puts the four questions and the four columns on one page, for one month. You get it by email, free. → Get the free sheet
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This article is part of a series exploring Japanese philosophy and intentional living: