Conventional financial planning advice is starting to show its age. It was originally intended for people with a stable salary, predictable expenses, and a career that looked more or less the same year to year. With the world around us changing rapidly, as a financial advisor, I am often reminding clients that it might be time to think beyond traditional saving and investing advice.
Here in the DC area, a lot of professionals in their 20s and 30s are doing well (really well, even!) but are finding that rising in the ranks professionally often means a more complex or uneven compensation schedule. You might work for a publicly traded company where a meaningful chunk of your compensation comes in the form of Restricted Stock Units (RSU), or you might be in freelance consulting, government contracting, or a field where project pipelines create bonus windfalls or lower earning stretches. And so, the typical advice for someone to “just save 20% of income” may simply no longer make any sense.
Why High Earners Still Feel Behind
The pattern we see most often in financial planning is that in a strong month, or even a great year, lifestyles expand. A nice dinner out, a spontaneous long weekend, finally upgrading something that’s been on your home improvement list. A spending increase here and there is to be expected, especially if you’ve been working long hours closing deals! But we often see that lifestyle tends to anchor at the peak. When a slower stretch hits, spending doesn’t shrink as fast as income did. Suddenly, you’re drawing down savings not because of an emergency, but just because March was quiet on the sales front.
For those with equity compensation, there can also be an additional layer. RSU vesting can feel like found money, a sudden deposit that seems separate from “regular” income. But that vest is fully taxable as ordinary income in the year it’s received, and if you’ve already spent it before accounting for the tax bill, you’ll be in for a big surprise come April. We’ve seen this exact scenario derail months of solid financial progress in a single week.
Start With Your Floor, not Your Ceiling
A good start for those who have variable income is to think about what a real “floor” budget looks like. It’s important to try to get to a real number, not an estimate. Rent or mortgage payments, insurance bills, loan payments, utilities, groceries, and transportation, all become the floor that will be the foundation the budget gets built on.
Once you know your floor, everything above it can be added intentionally. In a high-income month, surplus should move through a deliberate sequence: first, replenish your income buffer; then advance longer-term goals, which can include investment accounts, paying down debt, building toward a purchase; then, address discretionary spending. It is also important to note that when discussing popular financial planning advice, you’ll hear a lot about an emergency fund. This is not the same as an income buffer. An emergency fund sits dormant until an unexpected financial event occurs. An income buffer is actively working all the time, filling up in strong months, smoothing things out in lean ones, and allowing you to essentially pay yourself a consistent amount regardless of what actually came in.
Four Questions to Ask Yourself Right Now
For most people with meaningfully variable income, a buffer in the range of three to six months of floor expenses is a reasonable target. But the right number is personal. Someone whose RSUs vest quarterly on a set schedule has a different buffer than a consultant whose biggest client just hit pause on a project.
As an advisor, some of the first questions we ask clients with variable income are:
- Do you know your actual floor budget — not a rough guess, but the real number?
- If you had two slow months back-to-back, would you be stressed or covered?
- When a big check or vest lands, do you have a plan for it — or does it just get absorbed?
- Are you setting aside taxes on RSUs and bonuses as they arrive, or hoping it works out?
If any of those gave them pause, that’s where the planning work will begin.
Stop Waiting for a Good Quarter to Invest
Investing on a variable income has a way of becoming contingent. We’ve heard clients say: “I’ll max my Roth after I see how this quarter shakes out.” Then the quarter ends, the money gets absorbed elsewhere, and the contribution window closes. It’s one of the most common patterns, but one of the easiest to fix with the right structure.
A realistic approach is to automate contributions based on your floor assumptions, not upside hopes. This might be smaller than you think, but when income runs strong (say a big RSU vest, a year-end bonus, a particularly good quarter) then you can add to your plan more deliberately with a taxable brokerage contribution, a backdoor Roth, or extra cash toward a specific goal.
Volatility isn’t the Problem. Unpreparedness is.
One thing we hear often from people in their 20s and 30s is some version of: “I’m making good money, but I don’t feel like I’m getting ahead.” The value of working with an advisor in this situation goes well beyond investment management. It’s all about building a real floor budget, sizing the buffer to your actual volatility, modeling what your tax picture looks like across vesting schedules and bonus scenarios, and stress-testing your plan against a few months of slower income. And perhaps most importantly, it’s about agreeing on a framework in advance so that way when the time comes to make a big decision, there’s already a path in place towards your goals.
Unpredictable income isn’t a liability. For a lot of millennials and Gen Z, the volatility that feels uncomfortable in the lean months is the same dynamic that creates real acceleration in the strong ones. The goal isn’t to eliminate that variability, it’s to build a financial life that’s ready for both!
If you’re a HENRY or successful young professional looking to get a handle on their variable income strategies, start a conversation with our team today.