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
Emergency fund calculator →How many months of expenses do I have saved, and how many do I need?Freelance hourly rate →What hourly rate must I charge to match a target take-home or W-2 salary?
LEARN IT PROPERLY
CHAPTER · BUDGETING SYSTEMS & REAL-LIFE SOLUTIONS · STRATEGIESBudgeting on an Irregular Income
RELATED TERMS
Emergency fundEstimated tax paymentsZero-based budget
SOURCES
All terms →The Library →