The economy may be improving, but it's certainly not raising all boats—and even some of the rising boats' captains are nervous about what's to come. Maybe it's because their incomes are behaving more like roller-coasters.
That's according to a study from the Pew Charitable Trusts, which finds that whether they've gained or lost substantial amounts of income on an unpredictable basis, households that have experienced such income volatility are less financially stable.
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The study points out Census Bureau findings that the median household income increased by 5.2 percent from 2014–2015, with gains across all income levels, and that more Americans say they feel financially secure–with fewer saying they're unprepared for the unexpected.
But all is not well, regardless.
Among respondents to The Pew Charitable Trusts' 2015 Survey of American Family Finances, only 46 percent report making more than they spend; further just 47 percent say that their household bills and income were consistent and predictable from month to month.
The study also points to "recent work by the U.S. Financial Diaries and JPMorgan Chase Institute" that "has highlighted the high levels of monthly income swings that families face."
The shift in income is substantial for many. Previous Pew research studying longer-term, two-year income shifts found that, as of 2011, 43 percent of families reported swings of more than 25 percent.
That kind of income volatility takes a toll on budgeting, keeping current with bills, saving, paying off debt, and planning for the future.
While drops in income of that magnitude hit families so hard, most research has examined that rather than also evaluating positive income swings.
But this latest study looks at both, to see whether volatility affects families differently depending on whether it's positive or negative. What might be surprising is that the volatility of a positive change is disruptive to a family's financial well-being.
And that volatility is common: 34 percent of households report large changes from 2014–2015.
Some demographic groups are hit harder by income volatility, with at least 1 in 4 households across all income, educational attainment, race, and other groups experiencing substantive income shifts but 38 percent of families with incomes below $25,000 experiencing a gain, and 20 percent of Hispanic households and those with a high school diploma or less experiencing an income loss.
In addition, the volatility is dramatic, with households at the median income level experiencing losses of 49 percent and households with gains seeing incomes shoot up by 56 percent.
The study reports that median household income gain was $20,500, and median income loss was $25,000.
Whether it's a gain or a loss, families that experience income volatility report lower financial well-being and less savings than those with stable income.
The Pew study reports that, asked about "the economic realities they face throughout the year, including financial shortfalls, such as missing a bill or housing payment, forgoing medical care or prescriptions, and tapping a retirement account to compensate for insufficient funds," 72 percent of respondents from households with stable income reported no shortfalls in 2015.
But for those suffering income volatility, it was a very different story, with just 64 percent of those from households with income gains and just 63 percent from those with losses getting by without running short.
In addition, respondents reporting stable income are also more likely to say they probably or certainly could come up with $2,000 in an emergency.
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