How the Irregular Income calculator works
Updated November 2026
What income smoothing is
Income smoothing turns a pay pattern that jumps around into one steady budget number. Freelance, contract, gig and seasonal work rarely pays the same amount twice. A fixed budget built on a good month breaks in a bad one. A budget built on your bad months, the baseline, holds in both.
The formula, in plain words and symbols
Three steps, and the calculator above runs exactly these:
Step 1: line the months up. Sort your last 6 months of income from lowest to highest. Your average month (all six added up and divided by 6) is shown too, for contrast.
Step 2: average the three lowest. baseline = (lowest + second lowest + third lowest) / 3. That average, rounded to the cent, is your baseline monthly budget: the amount your bad months can carry.
Step 3: give good months a job. good-month set-aside = highest month - baseline, and swing = highest month - lowest month. The set-aside is what a best month should move to a buffer, because the swing shows how far income can fall.
The verdict then checks the baseline against the bills you must cover. If the baseline covers them, the tier is green. If it falls short by at most 10 percent of the bills, the plan is close. If it falls short by more than that, the bills are more than the smoothed budget can carry, and the page says so plainly.
A worked example
Take the numbers this calculator opens with. Six months of income: $3,200, $4,800, $2,900, $5,100, $3,600 and $4,400, with monthly bills of $3,000.
Step 1: the six months add to $24,000, so the average month is $4,000.00, and the lowest month is $2,900.00. Step 2: the three lowest months are 2900, 3200 and 3600, which add to 9700, and 9700 / 3 gives a baseline of $3,233.33. Step 3: the highest month is $5,100, so the good-month set-aside is $5,100 - $3,233.33 = $1,866.67, and the swing is $5,100 - $2,900 = $2,200.00. The baseline of $3,233.33 covers the bills of $3,000, so the verdict is the green tier. Change any one input and every one of those numbers moves; that is what the fields above are for.
How to read your result
Your baseline is the headline: the monthly budget to plan around. The average month sits above it on purpose; budgeting at the average is the mistake this tool exists to prevent. The set-aside tells a good month what to move aside before spending starts, and the swing tells you how much room the buffer has to cover. If the baseline falls short of your bills, the shortfall in the verdict line is the exact gap to close.
What the math takes as given, and what it leaves out
The math trusts the six months and the bills total you type. It does not predict next month, set money aside for tax, or split your bills by due date. Six months is the window this free tool uses; a longer history can shift the three lowest months, which is why the paid spreadsheet keeps rebuilding the budget as each new paycheck lands.
Read more: budgeting paycheck first
The Kollaz Money guide How to Budget With Irregular Income (Paycheck-First) walks through the same idea from the paycheck side, and the free Safe to Spend Calculator turns the smoothed budget into a daily spending number for one pay period.
Sources
- The method is plain arithmetic with no external constants: the average of the three lowest of the last 6 months, checked against the monthly bills. It matches the paid workbook description in the Kollaz catalog (KM-001, checked 2026-11-10): when income changes every month, the dashboard rebuilds the budget around each paycheck and maps bills and sinking funds to the pay that covers them.
- The verdict lines are house rules for this tool only, recorded in the build notes: the baseline covers the bills, or falls short by at most 10 percent of the bills, or falls short by more. They are display rules, not benchmarks and not advice.
Educational information only, not financial advice. Consider a qualified professional for decisions about your specific situation.