GLOSSARY · INCOME & SELF-EMPLOYMENT
Income buffer
A holding account for people with irregular pay: all income goes in, and a fixed amount moves out to the spending account on a set day each month, like a salary. Good months refill it and lean months draw it down, so household bills see a steady income even when earnings swing.
Also called: income smoothing account, pay yourself a salary, hill and valley fund
FORMULA
Months of salary held = buffer balance ÷ monthly salary paid to yourself
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · BUDGETING SYSTEMS & REAL-LIFE SOLUTIONS · STRATEGIESBudgeting on an Irregular IncomeRELATED TERMS
SOURCES
- Economic Well-Being of U.S. Households. Federal Reserve Board, 2025.