The standard advice in times of economic uncertainty is to build up your cash reserves and hold off on large unnecessary spending. Let me add to that something I’ve come to call “defensive budgeting.”

It’s the strategy I use to deal with how my family’s household income is frustratingly hard to predict. While I receive a steady paycheque, my husband works on contract in a creative field and notoriously volatile industry. And while the contracts keep coming, we know that there’s always the chance he’ll be off work for a few weeks or longer at some point in the year.

The possibility of a financial dry spell of indefinite length is something I’ve learned to build into how I manage our cash flow. With so many people worried about their job security in this economy, I thought I’d share my strategy.

Since my income is stable and more secure, most of our recurring, automatic payments – from mortgage and utility bills to subscriptions – come out of my account. We also share roughly equally routine spending on groceries, transportation, personal care and similar items. This leaves the rest of my husband’s income to cover the lion’s share of seasonal and one-off expenses and savings goals, as well as building up or replenishing our emergency funds.

In January, I typically list on a spreadsheet how much I estimate we’ll need for non-routine spending and savings throughout the year. Then, I rank those items in order of priority.

The first thing I typically set aside money for are our property taxes, an infrequent expense that doesn’t easily fit in my monthly bill-paying budget. It’s easier to save up for it in a few lump sums from my husband’s income, which I like to do a year in advance.

So for example, this spring we saved up for next year’s taxes. This is an extra financial buffer that gives me peace of mind. If we ever run into a long spell of unemployment, we have a long time to catch up.

Next up is usually saving up for our annual Christmas trip to Italy (where I’m from and my parents still live). I’ve learned the best fares are usually gone by the end of March so this is something we have to act on quickly.

That’s also, typically, when I pay for my kid’s summer camps (yes, this is a necessary expense, as we both work full-time and have no family nearby).

Then I typically rebuild or boost our rainy-day cash, as needed, top up our retirement accounts, and put $2,500 into my kid’s RESP.

After that comes paying the cost of his after-school activities for the fall and winter, as well as putting money into our “car fund,” since we’ll likely need a new ride in five to six years.

Once the essentials are covered, I move on to our “second tier” retirement savings goal, putting more money in our TFSAs or RRSPs.

I also tweak the list regularly, as there are always necessary or time-sensitive bigger-ticket expenses that crop up unexpectedly. If all goes well, later in the year is when I get to the fun “extras,” such as an added vacation or new furniture.

Generally, I don’t worry about what the next year will look like, unless I have a reason to. It’s a psychological trick that allows me to indulge in some fun spending and fight my tendency to want to just keep saving for the next cycle of necessities.

The bottom line is that paying for irregular expenses months in advance and ranking expenses and savings goals in order of priority has helped us live with a fluctuating household income for years without upending our lifestyle or falling behind on long-term financial priorities. If you’re worried about losing your job, defensive budgeting might help you, too.

Do you have another way to tackle financial uncertainty? I’d love to hear about it. Feel free to hit me up at: ealini@globeandmail.com.