Portfolio Income Diversification Score
How concentrated is your income?
Calculate income diversification score. See concentration risk across income sources. Enter primary income and secondary income for an instant result.
What this tool does
This tool calculates an income diversification score using the Herfindahl-Hirschman concentration index. Enter percentage from primary, secondary, tertiary, and other sources plus total income. Shows score 0-100 with rating.
Enter Values
Formula Used
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Calculations, display, or translation — let us know.
Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
Income concentration risk - relying on one source - is the single biggest financial vulnerability for freelancers and small business owners. This calculator scores income diversification using the Herfindahl-Hirschman Index adapted for personal income.
100% from one source: 0 diversity. 50/50 split: 50 diversity. Even 25% across 4 sources: 100 diversity (maximum). The higher the score, the more resilient income becomes to losing any one source.
Aim for 75+ diversity. Multiple clients, multiple income types (services + products + investments), or multiple industries all improve resilience. The tool takes 4 income source percentages - adjust to match your actual mix.
Quick example
With primary income of 60% and secondary income of 25% (plus tertiary income of 10% and other income of 5%), the result is 75/100. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.
Which inputs matter most
You enter Primary Income %, Secondary Income %, Tertiary Income %, Other Income %, and Total Annual Income. The rate and the time horizon usually dominate — compounding means a small change in either reshapes the final figure more than a similar shift in contribution size. Test this by doubling one input at a time.
What's happening under the hood
Herfindahl = sum of squared percentage shares. Diversity = (1 - H) × 100 / 0.75 (normalised so 4-way even split = 100). The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.
Using this in discovery calls
Knowing the number behind your rate gives you confidence in quoting it. Clients can sense rate doubt; they can also sense rate certainty. This tool helps build the latter.
What this doesn't capture
Freelance income is lumpy. The calculation assumes steady work; reality includes dry spells, delayed invoices, and client churn. Plan against a pessimistic version of the result, not the central case.
60% + 25% + 10% + 5% = 75/100.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
Herfindahl = sum of squared percentage shares. Diversity = (1 - H) × 100 / 0.75 (normalised so 4-way even split = 100).
References
Frequently Asked Questions
Why diversify income?
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