If you've recently ended the month and found yourself in a cash crunch, without enough income to cover your bills or a major expense, you aren't alone.
A new analysis of 100,000 customers of J.P. Morgan Chase (JPM) found that American households -- including both more affluent families and lower income people -- are increasingly dealing with sharp swings in monthly income and spending. About 41 percent of individuals witnessed a fluctuation in income of more than 30 percent on a month-to-month basis between 2013 and 2014, the study found. The report is the first from the new J.P. Morgan Chase Institute, a think tank that taps proprietary data from the bank to examine economic issues.
While that is stressful enough on a household's finances, the study found that consumption also had a great deal of fluctuation, regardless of income levels. An average person in the bottom two income quintiles saw consumption increases of about 27 percent in half the months, while top-quintile earners saw increases in 29 percent of the months, which could reflect unexpected bills, taxes, or other large payments.
The problem for most households: Income isn't moving in tandem with consumption. That means one month when a family sees a dip in income could coincide with a major household or medical expense, creating a cash crunch.
"Our evidence suggests that no income group is immune to financial fluctuation -- higher-income individuals experience as much volatility as lower-income individuals," JPMorgan said. "Moreover, that individuals in every income quintile experience significantly more volatility in consumption than in income suggests that managing consumption shocks is critical to financial resilience."
Creating a suitable financial cushion to handle those unexpected swings in income and consumption would help, although the study found that most households fall short. Although the study noted that there's no one-size-fits-all liquidity buffer that would be appropriate for all income levels, the typical American household requires $4,800 to weather monthly swings.
Meanwhile, the bank found that the typical liquid assets held by the median household is only $3,000, creating a $1,800 shortfall.
The study reinforces what other researchers have discovered about the post-recession years: Many households are lurching from month to month, hoping they have enough money in their bank account to cover their bills.
Seven out of 10 Americans are strained from financial issues ranging from crushing debt loads to income that's too low to cover their expenses, The Pew Charitable Trusts found in a report published earlier this year. That's left many American workers gloomy about their futures and the state of the economy, which has been rebounding since the recession, although favoring the fortunes of the top earners.
Since the recession, more Americans also are working in jobs with unstable schedules, thanks to new software that allows retailers and other companies to slot in workers for the hours when they are needed and the inability for millions to find full-time work. About 17 percent of the U.S. workforce is now coping with irregular work hours, the left-leaning think tank Economic Policy Institute found earlier this year. That's leading to income swings, unpredictable earnings and other stresses.
The post-recession volatility in income and spending could be addressed by new services from financial companies, and employer and government policies, J.P. Morgan said in the report. For instance, employers should consider more consistent work schedules, while the government could pay out tax refunds more gradually or structure tax payments so that they're smoothed out over time. Analytical financial planning platforms from financial services company could help households better predict and deal with swings in spending and income.