How to Budget When Your Contracting Business Income Isn’t Consistent

The main point of starting your own business is to finance your life while doing good work and being your own boss. Of course, you may have to wait until the money starts rolling in on a consistent basis. In fact, it may be a few years before you can predict how much money you will earn in any given month. Although this is common for any small business, it does make it harder to know how to pay your bills. Here are a few tips.

Figure Out Expenses
When you work for yourself, you have to figure out what to pay yourself. In essence, you have to build your salary from the ground up. One of the easiest ways to do that is to figure out your expenses. Make a list of all your personal expenses for:

  • Housing
  • Food
  • Utilities and other services
  • Transportation
  • Insurance
  • Healthcare
  • Incidentals, like clothing or home maintenance

This should give you a fairly good idea of what you need to be earning on a monthly basis. It may be less or much higher than what you think you can pay yourself. But at least it gives you some specific numbers to work with.

Set Minimum Income Limits
With a list of your expenses, you can start to build what you think your income could look like. In most households in California, people need at least two incomes. After all, we’re not known for having inexpensive housing or a short commute. So there’s a high degree of probability that your expenses may exceed your income, especially at first. But like many other independent workers and sole proprietors, you need to set minimums for your income. If your income is extremely variable, to a level of thousands of dollars’ difference from one month to the next, you may want to set a minimum and a target income based on the interval in which you want to get paid.

Create A Regular Payment Schedule
Once you have a sense of how much you think you can reasonably pay yourself, you should aim to set a regular payment schedule. Choose an interval that works best for your expenses. Many people choose to pay themselves once or twice a month, but you may prefer to do it weekly as well. If you are outsourcing payroll services or using ACH for direct deposit, you’ll need to make sure to start the payment process early enough. Whatever you do, make sure that you are still taking care of the non-payroll expenses for the business, so you can keep it running.

Set Aside Excess for Slow Periods
Many people who have run businesses before will tell you that until you get established, you’ll encounter periods of feast and famine. What this means is that you will have months or even a year where you have more work than you can handle. But if you don’t take care in your decisions with the money, you’ll find yourself stuck when work becomes slow. It’s a tricky balance. You have to pay yourself or you won’t be able to keep the business running. But if you take out too much when times are high, you won’t have enough to keep going when times are low. When you first have excess funds, work on building a cushion to get you through the next light month.

Forecast Changes Over Time
As you get established, you’ll notice that your income needs and expectations will change over time. For example, if you decide to offer a greater variety of services to build a more reliable clientele, you may end up with a higher income. Although you should focus on preserving cash flow and making sure you have some savings to protect you, this doesn’t mean that you have to work at the same income for the whole of your career. Examine your business spending and your income every few months or twice a year. If you feel comfortable, you may be able to adjust your payments upward.

Building a business means getting used to unpredictable income streams, especially at first. These tips make it easier. To find out more benefits of running your own contracting business, contact CSLS today!


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About CSLS

Contractors State License Service (CSLS) is the largest school in California devoted to the Construction professional. For over 23 years, CSLS has helped its students pass the exam to become licensed contractors in the State of California, licensing more students than any other school. From our main offices in Southern California, CSLS operates over 25 locations with full-service support and classrooms. We have grown to this extent by providing quality, professional services. In comparison, this provides 7 times the number of convenient locations than the second largest contractor school. Contractors State License Services is one of the only contractor schools in the state that is run by educators, not lawyers or people mostly interested in the bonding and insurance business. Contractors State License Services formerly operated under the oversight of the State of California's Bureau for Private Post Secondary and Vocational Education. As of January 1 2010, the new Bureau for Private Postsecondary Education (BPPE) came into existence replacing the BPPVE. CSLS now operates under the provisions of the California Private Postsecondary Education Act of 2009 (CPPEA), Article 4 Section 94874(f). Our Mission is simple; We can help you pass your California Contractors License Exam. Celebrating our 25th year, CSLS has helped over 120,000 students pass the California contractor licensing exam to become licensed contractors in the State of California. Additionally, we offer complete home study and online contractor’s license programs to help you pass your California contractors license exam. CSLS offers licensing classes for all types of contractor licenses, including General Engineering Contractor, General Building Contractor, Specialty Contractor, Insulation and Acoustical Contractor, Framing and Rough Carpentry Contractor, Cabinet, Millwork and Finish Carpentry Contractor, Concrete Contractor, Drywall Contractor, Electrical Contractor, Elevator Contractor, Landscaping Contractor, Warm-Air Heating, Ventilating and Air-Conditioning Contractor, and many others. For a complete list of contractor licenses, visit and tuned for more informative posts.