Learn / Part 2 · Running Your Own Finances
Resilience: Buffers, Shocks and Irregular Income
What protects you when life doesn’t go to plan?
In brief
Shocks are normal: a job loss, a repair, a gap between payments. A buffer, and for irregular earners a way to smooth income, stops a shock from becoming a debt.
Key ideas
A buffer buys choices
With a buffer you can say no to a bad deal, wait out a lean spell and avoid expensive credit.
Make an insight card →Size to your risk
Steady incomes need fewer months of cover; irregular incomes and sole earners need more.
Make an insight card →Smooth the lumps
Pay yourself a steady amount and let the buffer absorb the highs and lows.
Make an insight card →Try it
Buffer calculator
A buffer is money you can reach quickly, so a shock does not become a debt. The right size depends on how steady your income is.
Open the full page: formula, variables, worked example and cautions →
Also relevant: Irregular income smoother
Red flag
Relying on a credit line as your emergency plan.
Ask before you sign
- If my income stopped, how many months could I cover?
- Where is my buffer, and how quickly can I reach it?
Do this week
Open a separate account for your buffer and set a small automatic top-up.
Try it · 10–45 minutes
Calculate your essential monthly costs and divide your accessible savings by them.
Pause and reflect
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Words worth knowing
- Buffer (emergency fund)
- Accessible money set aside to absorb shocks, so a surprise bill does not become a debt.
- Liquidity
- How quickly and cheaply something can be turned into cash without losing value.
Companion notes written for this website, based on the topics of Chapter 7. They explain ideas and do not reproduce the book. General information, not personal advice.