What Is Income Protection Planning?
Income protection planning asks how the household would function if earnings were reduced or stopped for a period.
Areas of guidance
Planning for a period without household income
A general starting point for thinking about a stretch of weeks or months when income stops or drops. Educational only.
A stretch of time, not a permanent change
Income protection planning at a glance
- Weeks
- Not a permanent change, an interruption
- One figure
- What you could reach, over what keeps leaving
- 20 minutes
- Roughly what the exercise takes
- No cost
- Consultations carry no obligation
The subject
The interruption most households have not measured
This is about a stretch of time rather than a permanent change. Weeks or months where income stops or drops, and then usually resumes.
It reduces to one figure most people have never worked out: what you could actually access within a fortnight, divided by the commitments that keep leaving the account.
Questions worth thinking through
- Which commitments continue regardless of whether income arrives.
- How long you could manage on what you could reach within a fortnight.
- What already exists through work, and when it would begin.
- Whether anything you rely on would end with the income it depends on.
- Whether a second earner's income would be affected by the same event.
Why people ask
Why it is worth thinking about
- 01The estimate is usually optimistic
- People measure against everything that leaves the account rather than the part that would keep leaving it. Those are different numbers.
- 02The gaps are structural
- Something that exists may not begin immediately. The household covers whatever that interval turns out to be.
- 03Two incomes, one event
- The event that interrupts one income is sometimes the same event that changes the other. Worth saying out loud rather than assuming.
- 04Nothing prompts the review
- A temporary interruption gets survived and then forgotten, without anyone checking how close the margin was.
01
When this comes up
This subject rarely has an obvious trigger, which is most of why it goes unexamined. These are the moments that tend to raise it.
The exercise is worth doing while nothing is wrong, which is exactly when nobody thinks to do it.
- A move from salaried work into contract or self employed work
- Income that varies month to month, or depends on hours
- A single income supporting a household that two used to support
- A recent tight period the household found harder than expected
02
What to have ready
One recent month of outgoings does most of the work. Mark each line as continuing or not continuing if income paused.
Both earners joining is worth arranging where it applies, because the second income assumption is best tested with both people present.
- A recent month's outgoings, each line marked continuing or not
- A realistic figure for what you could access within two weeks
- Whether household income is fixed, variable or seasonal
- Anything through an employer, particularly when it would begin
Where you are
Income protection guidance where you are
Pay behaves differently in different places, so each of these starts somewhere different.
Worth testing
Assumptions worth testing out loud
- 01
That reserves are as reachable as they look
Money earmarked elsewhere, carrying a penalty, or needing someone else to release it is not reachable money.
- 02
That costs fall as much as income does
Some do. Against that, being at home raises running costs, and anything previously paid for still has to be covered.
- 03
That an arrangement starts when income stops
Arrangements rarely begin immediately. The length of that interval matters more than almost anything else.
- 04
That the second income is independent
Where care needs at home rise too, one event changes both incomes. Worth stating rather than assuming.
Next step
Talk with Arsine about a drop in income
She asks what your household budget actually rests on before discussing anything else. You leave with a clearer picture, not a decision you were pushed into.
Questions
Questions about planning for lost income
Three that decide most of the picture.
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.
Further reading
More on planning for lost income
How to Identify Essential Expenses During an Income Interruption
A useful emergency budget is more than cutting extras. It shows what must be paid, what can change, and when decisions are due.
What You Would Protect Last
Every household that loses an income makes the same set of decisions. The ones that manage it best are the ones that had already written the order down.
Request a consultation
Work out your own number
A short conversation about what your household rests on each month. No cost, no obligation, and nothing decided on the call.