Income Shock Survival Simulator

What is an income shock?

An income shock is a sudden fall in income: redundancy, illness, a client base drying up, a business that stops covering its own costs. The question it raises is arithmetic rather than emotional. How many months can savings cover the gap between what still comes in and what still has to go out? World Bank Global Findex 2025 data puts the share of adults who could reliably access extra money in an emergency at 56%, measured across economies rather than in any single country, so the answer for a large minority of households is close to none.

How to use this calculator

Enter the savings you could actually reach, your essential monthly expenses, and any income that would still arrive during the shock. The result is the number of months the savings cover the shortfall. Income Reduction is a label for the scenario rather than a lever: because you enter the remaining income directly, the runway comes from expenses minus that figure, and changing the percentage on its own does not move the result.

What counts as an essential expense?

The non-negotiables: rent or mortgage, utilities, food, insurance, minimum debt repayments. Going through a recent bank statement and separating those from the rest usually produces a higher figure than expected, which is the point of doing it before a shock rather than during one. A rough number is still worth entering, since the calculation is far more sensitive to the size of the shortfall than to the precision of any single line in it.

Things people often overlook

Irregular costs are the first. Annual insurance, car repairs, dental work and replacement appliances do not appear in a normal month but land squarely in a bad one. Estimating them yearly, dividing by twelve and adding that to essential expenses gives a truer shortfall. The second is what counts as reachable money. Kaplan, Violante and Weidner describe a large group of wealthy hand-to-mouth households, documented across eight countries, who hold substantial illiquid assets such as housing and retirement accounts while keeping almost nothing in cash or current accounts. On paper they look secure. In an income shock they have the same problem as households with no assets at all, because the wealth cannot be reached quickly or without cost.

A worked example

The defaults are 15,000 in liquid savings, 2,500 of monthly essential expenses and 1,000 of remaining income, with the scenario labelled as a 100% income reduction. The shortfall is 2,500 minus 1,000, or 1,500 a month, and 15,000 divided by 1,500 gives 10 months of runway. Remove that 1,000 of remaining income and the same savings cover 6 months, so partial income of 1,000 a month extends the runway by two thirds. Working the other way, holding 6 months of cover against a 1,500 shortfall takes 9,000 in savings.

What moves the number most

The shortfall does. Savings divided by shortfall means a 10% cut in essential spending stretches the runway by more than a 10% increase in savings would, because the shortfall sits in the denominator. Remaining income counts twice over: every unit of it reduces the shortfall directly, which is why a modest second income or a partner still working changes the picture so sharply. The result rounds up to whole months, so a runway of 31.25 months displays as 32.

The formula behind this

Savings divided by the monthly shortfall, where the shortfall is essential expenses minus the income still arriving. If remaining income covers expenses in full there is no shortfall, and the tool says so rather than returning an infinite runway. The model holds expenses flat, credits no interest or investment return on the savings, and assumes spending patterns do not change, which in a real income shock they usually do. The output is the length of the runway under the scenario as entered, not a forecast of how long a household would actually last.