A lot of people with irregular income can see money in their bank account but still can't answer simple questions. Can I afford that vacation? How much can I put toward retirement this year? Will I have enough when the tax bill comes?
That uncertainty leads to one of two things. Either you don't spend money on anything you love, or you feel guilty when you do. This guide walks through a simple system that fixes that. It works for self-employed people, solopreneurs, coaches, consultants, and business owners. No complicated spreadsheets, and it takes a few minutes a month.
The core idea: split every deposit by percentage
People with a steady paycheck can budget a set dollar amount for each category. With irregular income, you don't know what you'll make this month, so dollar budgets fall apart. Percentages don't.
Instead of budgeting dollars, you split every deposit by percentage into categories before you spend any of it. A big month fills every category faster. A slow month fills them slower. Either way, taxes and bills come first, and whatever is left is truly yours to spend.
The split happens in two stages:
- Stage 1: until this month's fixed costs are covered, deposits go only to taxes and fixed costs.
- Stage 2: once fixed costs are covered, deposits go to taxes, retirement, goals, the business, and guilt-free spending.
A real example split
Here is the split Megan, PrioritySave's founder, uses for her own business income.
| Category | Stage 1 (until fixed costs are covered) | Stage 2 (after fixed costs are covered) |
|---|---|---|
| Taxes | 25% | 25% |
| Fixed costs | 75% | 0% |
| Retirement and investments | 0% | 25% |
| Travel and vacation | 0% | 15% |
| Reinvesting in the business | 0% | 10% |
| Guilt-free spending | 0% | 25% |
| Total | 100% | 100% |
Her emergency fund is already at its target, so it isn't in the split right now. In an extra good month, she may also make a one-time transfer to retirement.
Your numbers will be different. The rest of this guide covers how to pick the right percentage for each category.
Before you start: business expenses and owner's draws
Two things change how you apply the split.
Cover business expenses first
The split is meant for money you can actually use, not money your business needs to operate. If you have real business costs (software, contractors, inventory, ads), pay those first or set them aside before splitting. Otherwise your percentages are based on money that was never really yours. Splitting your gross income still works if your expenses are small, and it errs on the safe side for taxes.
If your business is an LLC or S corp
- Sole proprietor or single-member LLC: client payments land in your business account. You pay yourself with an owner's draw, which is a transfer to your personal account. You can split each draw, or split deposits as they hit the business account.
- S corp: you pay yourself a salary through payroll, with taxes withheld, plus distributions. Since your salary already has withholding, you'd usually use a smaller tax percentage, and apply it mainly to distributions. A CPA can help you set that number.
1. Taxes
Taxes go first because they're non-negotiable. With a regular job, your employer withholds taxes and pays half of the 15.3% Social Security and Medicare tax. When you're self-employed, you pay the full 15.3% yourself, on top of income tax, and nobody sets that money aside for you.
A common starting point is 25 to 30% of every deposit. Where you land depends on two things:
- How much you earn. Tax brackets are progressive, so the more you make, the higher the rate on your top dollars. In a lower-income year, 25% may be enough.
- Whether your state has an income tax. If it does, or you're earning more, 30% is safer.
Having extra in April is a much better problem than coming up short. For a closer number, try the free tax reserve estimator.
Example: a $10,000 deposit at 25% means $2,500 goes to your tax savings before you spend anything.
You can track this yourself, or use PrioritySave. You enter your percentages once. When a deposit of $100 or more comes in, PrioritySave texts you the dollar amount for each category, and you send the money.
This is a starting point, not a guarantee of what you'll owe. Check your situation with a CPA or tax professional.
2. Fixed costs and the waterfall
Fixed costs are the bills you pay every month no matter what you earn. Common ones include:
- Rent or mortgage
- Food
- Health insurance
- Utilities, internet, and phone
- Car payment and other transportation
- Minimum debt payments
- Childcare
Average the last several months and round up. That way, if your rent goes up, you're still covered.
Fill fixed costs before anything else
Since taxes and fixed costs are non-negotiable, they get filled first. In Stage 1, every deposit goes 25% to taxes and 75% to fixed costs. Nothing goes to retirement, vacation, or spending money until the month's bills are covered.
Example: fixed costs are $5,000 a month. At 75%, it takes about $6,700 in deposits to cover them ($6,700 x 75% = about $5,000). Every deposit after that switches to the Stage 2 split.
This switch is the "waterfall." Once one category is full, the money flows to the next ones. You can track it by hand, but it's easy to lose count mid-month. In PrioritySave, you set a $5,000 cap on fixed costs, and once the category reaches it, PrioritySave sets fixed costs to 0% and switches its suggested split to Stage 2.
Three kinds of caps
- Monthly cap: for recurring monthly costs, like fixed costs. It tracks how much you've sent to the category this month, stops at the cap, and resets next month.
- Account cap: for a goal with its own bank account. If you keep a $60,000 emergency fund in a separate savings account, it stops at $60,000 and starts again if the balance drops.
- Category cap: the same idea, but based on the category's balance instead of the bank balance. Use this when several categories share one savings account.
3. Emergency fund
A common guideline is 3 to 6 months of fixed costs. Many people with irregular income keep more, because a slow quarter hits harder without a paycheck. Megan keeps 12 months. That means giving up some investment growth on the cash, in exchange for knowing she's covered even if the business stopped tomorrow.
Example: with $5,000 in monthly fixed costs, a 12-month target is $60,000. Once the fund is full, it comes out of the split. If it dips below $60,000, add a percentage back into Stage 2 (for example 15%, taken from guilt-free spending) until it's full again.
Want to find your own number? Try the free emergency fund calculator.
4. Retirement and investments
In the example split, retirement gets 25% of every Stage 2 deposit, spread across four accounts. Order matters: tax-advantaged accounts come first, and a regular brokerage account comes last.
| Account | Share of each Stage 2 deposit | Monthly cap | 2026 limit |
|---|---|---|---|
| Roth IRA | 10% | $625 | $7,500 |
| HSA | 5% | $367 | $4,400 individual / $8,750 family |
| Solo 401(k) | 6% | None (moved monthly, see below) | Up to $72,000 under age 50 |
| Brokerage | 4% | None | No limit |
Roth IRA
The 2026 limit is $7,500, and $625 a month gets you there. You can only contribute up to what you earned that year. If your income is too high to contribute directly, look into a "backdoor Roth."
HSA (health savings account)
A lot of self-employed people don't know about this one. It's triple tax-advantaged: the money goes in tax-free, grows tax-free, and comes out tax-free for medical costs. It rolls over every year, can be invested, and after 65 you can use it for anything (non-medical withdrawals are taxed like a traditional IRA).
You need a high-deductible health plan. Starting in 2026, that includes every Bronze and Catastrophic plan on the healthcare marketplace. A $367 monthly cap reaches the $4,400 individual limit in 12 months.
Solo 401(k)
For 2026, you can contribute up to $24,500 as the "employee," plus roughly 20% of your net self-employment earnings as the "employer," up to $72,000 combined if you're under 50. Read the full guide: What Is a Solo 401(k)?
Because the employer side depends on your profit, it's easy to put in too much. One way to avoid that is to send the Solo 401(k) percentage to a general savings account, labeled as retirement. At the end of the month, after expenses, move it into the Solo 401(k). In good months, add a one-time transfer on top.
Brokerage account
A regular brokerage account has no tax break, but you can take money out anytime without a penalty. That's why it comes after the tax-advantaged accounts.
Watch out in slow months. Monthly caps only fill in months with enough Stage 2 deposits. If a slow month leaves the Roth or HSA short, make a one-time transfer to top it up so you still reach the yearly limit.
5. Travel and other goals
This is where your priorities come in. In the example, 15% of each Stage 2 deposit goes to a travel and vacation fund. Yours might be a wedding, a house down payment, or a new car.
When you spend from a goal, record the withdrawal so the balance stays accurate. That way, when you see a big number in your savings account, you know exactly how much of it is for the trip and how much belongs to everything else.
To figure out how much to save each month for a goal by a certain date, try the free Savings Planner.
6. Reinvesting in the business
It's tempting to keep pouring money into the business. Mike Michalowicz's book Profit First makes the case for paying yourself first, which forces the business to run leaner.
In the example, 10% of each Stage 2 deposit goes here. This is separate from regular business expenses. It's for new ideas, growth, and experiments.
7. Guilt-free spending
Whatever is left is yours. In the example split, that's 25% of every Stage 2 deposit, plus anything freed up once the Roth IRA and HSA hit their monthly caps.
Without a system, people with irregular income often wait until the end of the month to know what they can spend. With every deposit already split, you can spend what's left throughout the month, guilt free, because taxes, bills, and savings are already handled.
Can you use one savings account for everything?
Yes. You don't need a separate bank account for every category. Taxes, vacation, and emergency money can all live in one savings account, as long as you track each category's balance.
The catch is that you have to record withdrawals. If you spend $5,000 from your vacation category and don't log it, the account still looks full while one category is actually short. You don't want that short category to be your tax money.
If you know you won't keep up with recording withdrawals, open separate accounts for the critical categories, like taxes and fixed costs.
Recap
- Split every deposit by percentage before you spend any of it.
- Stage 1: taxes and fixed costs until the month's bills are covered.
- Stage 2: taxes, retirement, goals, the business, and guilt-free spending.
- Start taxes at 25 to 30%, and adjust for your income and state.
- Use caps so full categories stop taking money, and the rest flows to the next ones.
- Fill tax-advantaged retirement accounts before a regular brokerage account.
- Whatever is left is yours to spend, guilt free.