http://www.washingtonmonthly.com/ten-miles-square/2015/05/financial_volatility_is_the_ne055774.php
Standard financial planning advice presumes that financial emergencies – the loss of a job, an illness or accident, or an unexpected car or household repair - are relatively infrequent for most households. But new research shows that many American households live in a constant state of financial uncertainty, experiencing major monthly swings in their income and expenses.
A recent report from the JPMorgan Chase Institute, which analyzed a sample taken from 2.5 million accounts, finds that volatility is the norm, even at higher incomes. According to the study, as many as 89 percent of Americans see their incomes fluctuate by more than 5 percent from month to month, while 60 percent see changes in spending greater than 30 percent from month to month. Moreover, these figures are roughly the same across all income levels.
Chase estimates that the average American household needs about $4,800 in savings to cope with these monthly shifts without falling into debt or cashing out assets - but it also finds that the vast majority of households fall short of this goal. The Chase analysis found that the typical middle-income household has about $3,000 in liquid assets, which means a shortfall of $1,800.
The report also found that the number one driver of income volatility for most households is labor income, which is perhaps not as stable as many might like to think. While some of the volatility is due to “five Friday months” and December bonuses, these factors still accounted for just 10 percent of monthly income volatility. The rest was due to changes in hours worked, overtime and “other factors not discernible in [the] data.”
The report’s findings reinforce a growing body of research on household income volatility, an important new framework for understanding the current state of Americans’ financial security - or lack thereof. This new research clearly points to the need for new ideas to help households manage the ups and downs of financial volatility without suffering too much hardship....
HARDSHIP MAKES FOR MEANINGFUL CHANGE IN PUBLIC POLICY...OR IN A PINCH, REVOLUTION. NOTHING LESS IS NEEDED IN THIS NATION AND IN THE WEST.
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