How to Budget and Avoid Debt on an Unreliable Income

Most financial advisors agree: Avoiding debt depends on a variety of factors, among which budget management is the most important.

Managing your expenses against your income lies at the core of healthy finances.

That’s precisely why our expert trustees have built money management tips on the fact that you can map out financial plans by comparing your’+’ versus your ‘-’, in other words, what goes in vs what goes out.

To create a reliable budget, you need a solid base, namely how much you have to spend and how much you earn.

But things can get a lot more complicated when your income is unpredictable.

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Indeed, the traditional money management guidelines are ineffective when your income varies.

With it, your ability to tackle invoices, living expenses, and essential savings also changes.

As a result, when your income isn’t a known entity in your budget plan, you could potentially expose yourself to debt, aka to expenses that you can’t afford to pay at any given time.

This asks an essential question about finance management, namely how to budget and avoid debt on an unreliable income.

Why don’t you have a reliable income?

There is only one reason why you wouldn’t have a regular income.

You are not a regular employee.

This could happen if you are a freelancer, a contractor, or a self-employed professional.

In Canada, freelancers and contract jobs make up for 40% of adult jobs in all sectors, which means that the independent working life is becoming a popular trend.

Some of the sectors that attract freelancers are typically writing, copywriting and design, but independent professionals also work in project management, education, accounting, healthcare, computer and IT, etc.

As a freelancer or a contractor, you are a valuable talent for any employer.

You can be hired for ad hoc projects, which means they don’t need to pay for a specialist all year round.

Additionally, you are not part of the HR payroll, which means you may not be entitled to benefit pay, paid sick days or holidays, or equipment or training investment.

However, some companies have started to provide benefits to their freelancers.

But, all things compared, a freelancer is cheaper in the long term than a full-time employee.

Freelancers value their positions despite some of the disadvantages.

For many, freelancing is synonymous with freedom, as you can take time off whenever you want and work from any location.

For many, the switch to freelancing has been a decision dictated by the need for additional income.

Parents with young children, for instance, can work from home and look after the kids at the same time, which saves child care costs.

Individuals who need a second source of income or to replace a lost income during unemployment or retirement have also found freelancing a practical solution.

The financial problems that freelancers meet

It is the nature of the job to be unreliable.

Some weeks, freelancers are overloaded.

Others, nobody needs their services.

The income is unpredictable.

Therefore, freelancers are more likely to work longer hours to tackle more work.

It’s not uncommon for freelancers to work over the weekend too.

As a result, they become mentally exhausted—their productivity decreases along with their creativity.

The quality of work declines, and the already unreliable income can grow even more unreliable.

It’s also fair to say that the gig economy creates an unprecedented competition environment.

Clients tend to have unrealistic expectations in terms of low cost and turnaround time.

Unfortunately, freelancers can feel forced to match their clients’ expectations to secure projects, perpetuating unhealthy work habits that affect their productivity and income.

How unreliable income can affect you

Unpredictable income affects freelancers in different ways, depending on their situations.

Parents with young children have high expenses and little time to dedicate to growing their independent business.

As a result, their stress levels increase dramatically until they are forced to look for emergency financial solutions, such as maxing out their credit cards or using payday loans.

Gen Z or young Millennials who don’t have sufficient professional experience can’t position themselves as experts.

They are new players in the professional market, and as freelancers, they can find it hard to find their first clients.

This group is more likely to accumulate debt rapidly, as they lack emergency funds or financial backups.

Finally, men from 45 to 54-year-old have the highest risk of unpredictable income.

Many are self-employed and run their own businesses.

They often pour money into the company, which makes it challenging to save for retirement or prepare a financial plan to get out of debt.

Managing debt with a roller-coaster income

Full-time freelancers should create 2 budgets to manage months with high income and low months.

The process enables them to create different sets of financial goals depending on the income.

For instance, a high-income month could have a saving objective, which can serve as a backup plan for low-income periods.

Some freelancers prefer to separate bank accounts for their work and living costs.

They use the system to issue themselves a paycheque every month or every invoicing period.

This can help with creating a sense of regularity.

Rather than focusing on how much income you have every month, some recommend visualizing how much you have to pay.

Whether you choose to use jars to create independent expense piggy banks or an app to keep track of payment requirements, the strategy makes freelancers more accountable for their money.

Don’t let debt get the better of you

Unfortunately, even with a freelancer-friendly budget system, debt can still happen.

But when they do, freelancers have options to get the situation under control.


  • They can reach out to their creditors to discuss debt settlement options. As a freelancer, it can be a good idea to calculate your debt and how much you can afford to pay, for instance, as this could encourage creditors to consider your debt schedule plan.
  • Credit counselling can provide a debt management plan that waives interest.
  • A licensed insolvency trustee can help you obtain debt forgiveness for unsecured debts with personal bankruptcy or a consumer proposal.


Your budget relies on understanding how much you’re earning vs how much you have to spend.

However, it’s hard to know how to budget and avoid debt on an unreliable income.

Our trustees are available 24/7 at (877) 879-4770 to help you with debt assessment and debt relief plans. 

Information on Consumer Proposals

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