Latest / Budgeting for Beginners with Fexingo: Cash Envelopes, Apps, and Simple Money Tracking / How to Budget Like a Freelancer With Variable Income
Transcript
- Lucas: So let me paint a picture for you. It's mid-July 2026, and you're a freelance graphic designer. In January you made eight thousand dollars. In February you made two thousand. March was five. April was four. May was seven. June was three. Your income is a roller coaster. Luna: And the bills? Rent is rent. Groceries are groceries. They don't follow that pattern at all. Lucas: Exactly. So the standard advice — 'make a budget' — feels almost insulting when you don't know what you'll earn next month. That's the problem we're solving today. Luna: Alright, I'm in. What's the first move for someone staring at those numbers? Lucas: Step one: find your floor. Your minimum monthly income — the lowest month you've had in the last twelve months. For our designer, that's two thousand dollars. That becomes your base budget. Luna: So you build your entire spending plan around the worst month? That sounds tight. Lucas: It is tight. But it's honest. Rent, utilities, groceries, minimum debt payments, essential transportation — all of that has to fit inside that floor number. If it doesn't, you have a structural problem that no budgeting trick will fix. You'd need to raise your floor, lower your fixed costs, or both. Luna: Makes sense. And when a month comes in above that floor? Lucas: That's step two: surplus allocation. Any money above the base budget gets divided. I like three buckets: first, a buffer account to smooth future low months. Second, irregular or annual expenses — car insurance, holiday gifts, that kind of thing. Third, your financial goals — savings, investments, paying down debt faster. Luna: Interesting. So you're essentially using the high months to subsidize the low months. What's the split look like? Lucas: I recommend fifty percent to the buffer, thirty percent to irregular expenses, and twenty percent to goals. But the key is the buffer — that's what stops the panic when February rolls around again. Luna: And the buffer needs to be a real account, not just a mental category, right? Lucas: Absolutely. Separate high-yield savings account. You want friction to discourage dipping into it for nonessentials. Our designer, after a seven-thousand-dollar month, would put twenty-five hundred into the buffer, fifteen hundred into irregular expenses, and a thousand into goals. Luna: That leaves three thousand for the base budget. And over a year, those buffers add up. Let's say she has three high months and nine low months — the buffers cover the gaps. Lucas: Right. And step three might be the most overlooked: tax set-aside. When you're a freelancer, there's no employer withholding. Our designer needs to set aside roughly thirty percent of every dollar she earns for federal and state taxes. Luna: So you're saying the base budget has to account for that too? That's brutal. Lucas: It has to. Otherwise, April fifteenth is a crisis. I tell freelancers to treat tax set-aside like a fixed expense — same as rent. Put it in a separate account every time you get paid. The IRS doesn't care if your income is variable. Luna: Alright, so we've got base budget, surplus allocation, tax set-aside. What about the actual numbers? How do you track this without losing your mind? Lucas: Good question. I recommend a rolling twelve-month average. Every month, add the new month's income, drop off the oldest. That gives you a moving target for your base budget. You update it quarterly. Luna: So after a few good months, your floor might actually rise. Lucas: Exactly. And that's the goal. The system isn't about locking yourself into poverty. It's about stability while you grow. Once the buffer has three to six months of base expenses, you can start allocating more of the surplus to goals. Luna: This is really practical. But I want to ask about the emotional side. Doesn't living off a 'worst month' budget feel restrictive all the time? Lucas: It can. That's why the surplus allocation includes fun money. I tell people to budget a small amount for guilt-free spending — even in the base budget. Maybe fifty bucks a month. It's not much, but it keeps you sane. Luna: And when a big surplus hits, you can give yourself a little more. That's the reward. Lucas: Right. The system is designed to let you enjoy the highs without panicking during the lows. And the numbers work. I've seen freelancers go from constant stress to actual peace of mind within six months of implementing this. Luna: Is there a tool you recommend for this? Spreadsheet? App? Lucas: I'm a spreadsheet guy. But there are some good apps that handle multiple income streams. Whatever you use, the important thing is that you see your base budget, your surplus, and your tax set-aside as separate line items. One number for spending, one for saving, one for taxes. Luna: And if you can automate the transfers — surplus into buffer, tax set-aside into its own account — even better. Lucas: Absolutely. Automate what you can. That reduces the mental load. Luna: Alright, let's walk through a concrete example. Say our designer has a four-thousand-dollar month. What happens? Lucas: First, she sets aside twelve hundred for taxes — that's thirty percent. That leaves twenty-eight hundred. Her base budget is two thousand. So she has eight hundred in surplus. Fifty percent of that is four hundred to the buffer. Thirty percent is two hundred forty to irregular expenses. Twenty percent is one sixty to goals. Luna: And the two thousand base covers rent, utilities, groceries, transportation, minimum debt, and that fifty-dollar fun money. Lucas: Exactly. She's living on two thousand, but she's also building a safety net and preparing for taxes. That's the whole system. Luna: Okay, I'm convinced. But what about someone whose income is even more variable — like a real estate agent who might go three months with zero commission? Lucas: Then the floor is zero. In that case, you need a different approach. I'd build a buffer first — before even setting a base budget. Save up three months of essential expenses from your first few paychecks, then start the system. The floor effectively becomes whatever you can reliably earn from a side gig or part-time work. Luna: So the principle adapts. The key is knowing your numbers and having a plan for the gaps. Lucas: Exactly. The variable income budget isn't a one-size-fits-all formula. It's a framework. You adjust based on your reality. Luna: Hey, speaking of reality — one thing that makes this show possible is that we don't run ads. We keep it listener-supported. A handful of people chip in monthly through buy me a coffee dot com slash fexingo, and that genuinely funds making these episodes. Lucas: Yeah, and we're grateful for that. It means we can focus on what's useful rather than what sells. If you've gotten something out of these episodes, that's the way to keep it going. Luna: Alright, back to the numbers. So once you've built up a buffer of, say, six months of base expenses, what then? Lucas: Then you can relax the fifty-thirty-twenty split. Maybe you start putting more toward investments or paying off debt faster. The buffer gives you breathing room to think long-term. Luna: That's the goal, right? Not just surviving the variable income, but thriving despite it. Lucas: Exactly. The variable income life has trade-offs — freedom, flexibility, but also uncertainty. This system doesn't remove the uncertainty. It makes it manageable. Luna: I think the biggest takeaway is: don't budget based on what you hope to earn. Budget based on what you know you can count on. Lucas: That's the headline. And update your floor every quarter as you get more data. Over time, your floor will likely rise. That's success. Luna: But even if it doesn't, the system still works. You're not living in fear of a low month. Lucas: Right. And that's the peace of mind we're after. Thanks for listening, everyone. We'll be back next time.