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We Tracked Every Dollar 235 US Households Spent for a Year, and Found Widespread Financial Vulnerability (hbr.org)
Income inequality in the United States is growing, but the most common economic statistics hide a significant portion of Americans' financial instability by drawing on annual aggregates of income and spending. An article on the Harvard Business Review adds: Annual numbers can hide fluctuations that determine whether families have trouble paying bills or making important investments at a given moment. The lack of access to stable, predictable cash flows is the hard-to-see source of much of today's economic insecurity. We came to understand this after analyzing the U.S. Financial Diaries (USFD), an unprecedented study to collect detailed cash flow data for U.S. households. From 2012 to 2014 we set up research sites in 10 communities across the country. The USFD research team engaged 235 households that were willing to let us track their financial lives for a full year. We tried to record every single dollar the households earned, spent, saved, borrowed, and shared with others. [...] Our first big finding was that the households' incomes were highly unstable, even for those with full-time workers. We counted spikes and dips in earning, defined as months in which a household's income was either 25% more or 25% less than the average. It turned out that households experienced an average of five months per year with either a spike or dip. In other words, incomes were far from average almost half of the time. Income volatility was more extreme for poorer families, but middle class families felt it too.
The less predictable your cash flow is, the more you need to save. You can only ever rely upon the fraction of your cash flow that is reliable (which is so obviously true that it's actually a tautology).
That means the fixed expenses + minimum variable expenses in your budget should always be less than the minimum you might get paid in a month, excluding things like bonuses, commissions, or overtime.
Moreover -- and I realize that people would consider this extreme -- if you can get your bare-bones budget down below the amount of income you'd get from unemployment if you lost your job, that would be even better. For example, in my state unemployment pays the about same as full-time minimum wage and my household has two working adults, so double-unemployment would net about $2,400/month and that's the number I budget around.
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
My wife gets paid every two weeks, so two months of every year she gets three paychecks instead of the usual two. So a 50% uptick in income two months of every year.
A weekly paycheck means that four months of the year you'll get five checks instead of four. Note that that frequency conveniently maps to a 25% uptick in income four months of every year without any instability at all.
Not going to bother running even preliminary numbers for a household with two jobs, one paid weekly, one biweekly, but I expect that most of the income instability they saw could be accounted for that way.
Caveat: I'm not trying to imply that all the income instability was illusory, but it's certainly possible that a good chunk of it was an illusion produced by monthly spending and weekly/biweekly income....
"I do not agree with what you say, but I will defend to the death your right to say it"
I would say the Slashdot community leans more libertarian (note the small 'l' there) than anything else. You'll probably stumble across just about every political philosophy here at some point, but I'd say that a majority (or at least a plurality) fall into the classical liberal category more so than anything else. I mean look at all of the recent wage gap articles and tell me that the community is socialist based on the comments that are posted and upvoted there.
The site ownership may fall into a different camp, and really they're the ones controlling what stories are put up. I don't think the community really would have wanted this.
This is exactly it I'm sure. Even as a salaried employee I see quite a bit of variability.
As a ploy to pay me less, my employer moved a large portion of my regular pay to a "performance bonus" that is payed out once a year, contingent on the company meeting specific metrics (which it conveniently never does, no matter how successful).
That bonus is a big spike once a year that roughly triples one of my paycheques (though the official math says it should more than quadruple it)
Additionally, in my country, employment insurance, and the government pension plan are deducted from paycheques, but have a cap that I hit about 3/4 of the way through the year, after the cap is reached, my paycheque goes up by the amount of the deductions (roughly 15-20% increase)
I'm not sure how they calculated the twice yearly 3 paycheque months, but most people are paid bi-weekly, rather than monthly, so that adds variability to each month as well.
Now all of that is just for a salaried employee. They quoted "full time", not "salary", a full time hourly employee is likely to have overtime pay that varies by a large margin depending on various factors. There are also specific industries that have different variabilities (for example teachers often don't get paycheques during the summer break, but the pay they would have gotten then is spread out over the rest of the year instead. Nurses, police, and paramedics are often paid shift premiums for night time or weekend shifts, and don't work the same number of those on any given paycheue, sales people often get a commission on top of their base pay, serving staff, hair stylists, and taxi drivers often have tips). Additionally some companies don't pay vacation time, but instead top up the rest of the paycheques by an equivalent amount and then give the vacation time as unpaid.
There are all sorts of ways that full time employees end up with variable salaries.
Ironic that this article is in the Harvard Business Review! The Harvard Business School has been source of much of the business policy of the last several decades that pushed risk on workers and away from corporations. Who could have guessed that squeezing worker pay and social safety nets would result in increased economic instability for them!