Income Diversification Planner
Maps all income sources, calculates concentration risk, and scores overall income diversification. Highlights dependency on any single source and models the financial impact if a source is lost.
Personal - Income Diversification Planner.xlsx
Excel (.xlsx) — No macros — Works in Excel, Google Sheets, LibreOffice
What This Spreadsheet Solves
- Over-reliance on a single income source without quantification
- No framework for evaluating income stream stability
- Unclear financial impact if the primary income source disappears
- Difficulty prioritizing which new income streams to develop
- No objective diversification score to track improvement over time
Who This Is For
- Freelancers and consultants with multiple clients
- Households with dual incomes evaluating risk exposure
- Side-hustle builders assessing portfolio balance
- Financial planners modeling client income resilience
Inputs
- textIncome Source Name
- $Monthly Income Amount
- #Stability Rating (1-10)
- %Correlation to Primary Source
- textGrowth Potential (Low/Medium/High)
Outputs
- Herfindahl-Hirschman concentration index
- Diversification score (0-100)
- Income at risk if largest source is lost
- Stability-weighted monthly income
- Recommended next income stream type
How Calculations Work
Each income source's share of total income is squared and summed to produce a Herfindahl-Hirschman Index (HHI). A lower HHI indicates better diversification. The diversification score normalizes HHI to a 0-100 scale. Income at risk quantifies the loss if the largest single source disappears. Stability-weighted income adjusts each source by its reliability rating. Recommendations are generated based on gaps in stability and correlation.
Example Use Case
Scenario: Three income sources: primary job ($6,500/month, stability 8), freelance consulting ($1,800/month, stability 5), rental income ($1,200/month, stability 9). Consulting is 70% correlated with the primary job industry.
Result: HHI: 0.48 (moderately concentrated). Diversification score: 52/100. Income at risk if primary job lost: $6,500/month (68% of total). Stability-weighted income: $8,290/month. Recommendation: add an income source uncorrelated with employment sector.
What You Get — 5 Sheets
Technical Details
Frequently Asked Questions
What is a good diversification score?
Above 70 indicates healthy diversification. Below 40 signals high concentration risk. Most people with a single full-time job score 15-25.
How do I estimate correlation between income sources?
Ask: if my primary income dropped 50%, would this source also be affected? Same industry or same client base implies high correlation (70-100%). Unrelated sectors are low (0-30%).
Does passive income count?
Yes. Include dividends, rental income, royalties, and any other recurring passive sources. These typically have low correlation to employment income, improving your score.
How often should I reassess?
Review whenever you add or lose an income source, or at least semi-annually. Income mixes shift as side projects grow or contracts end.
What if my only income is a salary?
Your HHI will be 1.0 (maximum concentration). The model will recommend developing a secondary source with low correlation and high stability to reduce risk.
Download Income Diversification Planner
Ready to use immediately. Enter your data in the INPUT sheet, see results in OUTPUT.