The story of Becky and Jeremy Moore (names changed) from Financial Diaries was recently cited in a New York Times article about budgeting during the coronavirus. Becky and Jeremy’s story illustrates one major lesson from the Financial Diaries study of 2012–2013 — that financial insecurity is not simply a result of not having enough money, but rather of not having money at the right time, when it is needed. Financial Diaries documents how income volatility affects millions of Americans in different ways, from working on commission to unpredictable work hours, making it all the more difficult to set aside enough cash to weather a global pandemic.
From the article:
Step 3: Create a reasonable emergency fund
A safe-to-spend number won’t work well for everyone, especially if you don’t have a stable, predictable paycheck.
Take the couple identified as Becky and Jeremy Moore (their real names were changed for privacy’s sake), whom the authors Jonathan Morduch and Rachel Schneider followed for months for their book “The Financial Diaries.” Jeremy, an Ohio-based long-haul truck mechanic, earned most of his salary in the summer and winter months when the weather was bad and trucks would get beat up. When it was more temperate, he took home as little as $300 a week. And the couple is not alone: About half of households, according to a 2015 Pew Charitable Trust study, see at least a 25 percent gain or loss of income from one year to the next.
Financial planners would say the Moores should simply dip into their emergency fund (a pot of money consisting of six months’ worth of essential expenses in a savings account) when times get tight. But this commitment can run into the tens of thousands and is a nearly impossible feat for families with volatile earnings, and difficult even for higher earning households.
Source: Taylor Tepper, New York Times, Published August 4th, 2020.