Income Gains and Month-to-Month Income Volatility: Evidence from the US Financial Diaries

The US Financial Diaries track the daily finances of low and moderate-income households over a year. The households faced substantial swings in income from month to month. On average, they experienced 2.7 months when income fell more than 25 percent below average, and 2.7 months when income was more than 25 percent above average. The volatility is summarized by an average coefficient of variation of monthly income (within year, averaged across households) of 39 percent. The CV is greatest (55 percent) for households below the poverty line, but the CV remained relatively high (33-35 percent) and steady for households with income from 100 percent of the poverty line up to 300 percent. Thus, in the non-poor sample, greater income did not imply notably greater income stability.