Calculator

Irregular income baseline calculator

If your pay changes from month to month, a budget built on your best month fails in your worst one. This calculator takes the months you type in and gives you a cautious number to plan bills from. It uses only your figures, runs on this page, and sends nothing anywhere.

How the calculator works

There are two rules, and you choose one.

• Lowest month. The baseline is the smallest month you entered. This is the most cautious option. Every other month then produces a surplus that you can send to savings, a buffer or goals.
• Average of the lowest months. The calculator sorts your months from smallest to largest, takes the smallest N (you pick N from 2 to 6), adds them up and divides by N. If you pick a larger N than the months you typed, it averages everything you typed and says so.

Blank boxes and entries that are not valid numbers are ignored. Negative numbers are ignored too. The result is rounded to the nearest cent, and the page also shows your lowest month, highest month and the average of all months you entered so you can see how wide your swings are.

Which rule should you use?

Use the lowest month when your essentials are close to your low months, or when a shortfall would cause real trouble such as missed rent or utilities. Use an average of the lowest months when one very poor month was a one-off, for example a stretch of illness or a gap between contracts, and you want a baseline that is not set by an outlier. Averaging two or three low months gives a number between your worst month and a typical one. It is higher than the lowest-month rule, so the plan carries a little more risk.

Whichever you choose, build the plan in this order: essentials first (housing, utilities, food, transport, insurance, minimum debt payments), then a buffer, then goals and extras. If the baseline does not cover essentials, see the guide on emergency fund versus debt and the article on the best monthly budget method for irregular income.

What to do with the baseline

Treat the baseline as your monthly income for planning. When a month brings in more than the baseline, do not raise your spending to match. Move the extra into a buffer or a goal, so that a low month later is covered by money you already have. The budget buffer guide explains how to build that cushion in small steps, and the sinking fund calculator works out the monthly amount for bills that arrive once or twice a year.

Limits

• Use take-home income (after tax and any amounts set aside for tax), not gross billings. If you are self-employed and have to pay your own taxes, set that money aside before you call anything income.
• Six to twelve months of history gives a more reliable picture than two or three. Seasonal work may need a full year so every season is represented.
• The calculator cannot know about changes ahead, such as a lost client, a new job or a rate change. Update the baseline when your situation changes.
• It is general information, not financial, tax or legal advice.

Where this comes from

The lowest-month rule is the common starting point in consumer education on variable income. We checked a state banking and finance department consumer page and several credit union and financial education pages, which all describe basing the budget on the lowest recent month and sending the surplus from better months to savings. Averaging the lowest few months is our own variation, offered as a less strict option, and it is not taken from a named standard. The arithmetic is simple enough to check by hand.

Go deeper

• Best monthly budget method for irregular income
• Budgeting when paychecks and bills do not line up
• Budget method chooser