Planning for a period without household income
A general starting point for thinking about what would happen if income stopped or was reduced for a while.
The interruption most households have not measured
This subject is about a stretch of time rather than a permanent change. Weeks or months where income stops or drops, and then, usually, resumes.
It gets far less attention than the permanent case, which is odd, because a temporary interruption is the more likely of the two. Most households can describe what they would do if a car failed. Far fewer can say how long they could manage if a salary paused.
The whole subject reduces to one figure most people have never worked out. What you could actually access within a fortnight, divided by the commitments that would keep leaving the account, gives a number of months. That number is where any useful conversation starts.
There is no correct answer to it, and anybody offering a single target figure for every household is describing an average rather than your circumstances. What matters is knowing your own number honestly instead of assuming it.
The reason this subject gets so little attention is partly that it has no obvious trigger. A permanent change forces a household to deal with it. A temporary one is survived, often uncomfortably, and then the household moves on without ever examining how close the margin was. Nothing prompts the review afterwards.
That is why the exercise is worth doing while nothing is wrong. Working out a runway figure takes about twenty minutes at a kitchen table and requires no specialist knowledge. Most households find the result more reassuring than they expected. A minority find the opposite, and for them it is the single most useful twenty minutes in this entire subject.
Why it is worth thinking about
- 01
Because the estimate people carry in their heads is almost always optimistic. It is made against the total that leaves the account rather than against the part that would keep leaving it, and those are very different numbers.
- 02
Because the gaps in this area are structural rather than obvious. An arrangement that exists may not begin immediately, and the household covers whatever that interval turns out to be.
- 03
Because two earner households frequently carry an untested assumption that the second income continues unchanged. In some circumstances the event that interrupts one income is the same event that changes the other.
Situations that commonly prompt a conversation
- A move from salaried employment into contract or self employed work.
- Household income that varies month to month, or that depends on hours rather than a fixed figure.
- A single income supporting a household that was previously supported by two.
- A recent period of reduced income that the household found tighter than expected.
- Discovering that something assumed to be in place ended with a previous job.
- A new commitment that would continue regardless, such as a mortgage or care costs.
Questions worth thinking through
- 01
Which regular commitments continue regardless of whether income arrives.
- 02
How long your household could manage on what it could actually reach within a fortnight.
- 03
What already exists through work or elsewhere, when it would begin, and where the gaps sit.
- 04
Whether anything you rely on would end at the same time as the income it depends on.
- 05
Who else would be affected, and whether their own income would change too.
- 06
What you would do differently in month one compared with month six.
The information on this website is general and educational. Availability depends on individual circumstances.
How the conversation runs
Every consultation is virtual. There is no travel to arrange and no in person option.
- Step 01
You get in touch
By phone or through the request form. No documents are requested and nothing sensitive is asked for.
- Step 02
Both earners join where relevant
Consultations are virtual, so two people can join from different places. For this subject in particular that matters, because the second income assumption is best tested with both people present.
- Step 03
The household floor comes first
The conversation begins with what your household actually rests on each month, before anything else is discussed.
- Step 04
Where the gaps sit
General explanation of the intervals and dependencies that commonly catch households out, in plain language and without pressure.
- Step 05
You leave with a clearer picture
Not a decision you were pushed into. Nothing is decided on the call.
What to have ready
None of this is required and no documents are requested in advance. It simply makes the conversation more useful to you.
- A recent month's outgoings, with each line marked as continuing or not continuing.
- A realistic figure for what you could access within two weeks without penalty.
- Whether household income is fixed, variable or seasonal.
- Anything that exists through an employer, particularly when it would begin.
- Whether a second earner's income would be affected by the same circumstances.
Assumptions worth testing
- That reserves are as reachable as they look
- Money earmarked for something else, money that carries a penalty to access, and money in a joint arrangement somebody else would have to agree to release are all worth counting separately from money you could genuinely use next week. The reachable figure is often materially smaller than the total.
- That costs fall as much as income does
- Some do. Commuting stops and discretionary spending falls quickly. Against that, being at home more raises household running costs, and anything previously handled by paying somebody has to be absorbed as time or paid for differently. The net effect is rarely as favourable as a first estimate suggests.
- That an arrangement starts when the income stops
- Arrangements that exist frequently do not begin immediately. Whatever that interval turns out to be, the household covers it. Knowing its length in advance is worth more than knowing almost anything else about the arrangement.
- That the second income is independent
- In some circumstances the event interrupting one income is the same event that changes the other, particularly where care needs at home increase at the same time. It is an assumption worth stating out loud rather than leaving implicit.
Questions people ask about this
How many months should a household be able to manage?
There is no correct answer, and a single figure offered for every household is an average rather than guidance. What matters is knowing your own number honestly and understanding which commitments it has to cover.
Is this only relevant to self employed people?
No. Salaried households are equally exposed to intervals before anything begins, and to the possibility that an arrangement ends at the same time as the employment providing it.
What if I already have something through work?
Two details matter more than the rest: when it would begin, and whether it continues if the employment ends. Many people have never checked either, and both change the picture considerably.
Articles on this subject
- 01Planning for a Period Without Household IncomeIncome interruption is more common than the events people usually plan for, and it is far less discussed. Here is a general way to think it through.
- 02Questions to Consider When Reviewing Your Family's Financial NeedsReviewing what your household depends on is mostly a matter of asking better questions. These are the ones that tend to surface the things people have not thought about.
- 03Organizing Important Financial Information for Your FamilyA single page listing what exists and where it is kept does more for a family than a filing cabinet nobody knows how to open.
Talk it through
Everything on this page is general. A conversation is where it becomes specific to your household. No cost, no obligation, and nothing decided on the call.