As America imagines a 21st-century safety net—and the roles of governments, businesses and communities—some of the solutions will involve just giving money. The right amount of money at the right time can make a big difference for people, especially for working families without much financial slack. That requires beginning with the idea that in fact it’s not just about money. How and when matter too.
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Viewing all posts with tag: US Financial Diaries
The USFD Methodology: The financial lives of low- and moderate-income Americans
The U.S. Financial Diaries (USFD) is a research study that collected detailed financial data from 235 low- and moderate-income households over the course of a year. USFD employed a research approach that combines quantitative and qualitative methods. Our goal was to better understand households’ financial situations and choices by observing household finances at frequent intervals over a long period of time. We designed surveys to record every dollar that participating families earned, spent, borrowed, saved, and shared with family or friends. We also tracked government transfers, assets, financial instruments, and employment, and asked households about their financial goals, attitudes about money, significant life events and physical and mental health.
US Financial Diaries Household Profile: Living Paycheck to Paycheck
Amy Cox is a white 34-year-old single mother of two. She lives with her children, Hailey, 9, and Andy, 8, near Cincinnati, OH. Amy is among the few people in the USFD study who lived paycheck-to-paycheck. During our year with her, she spent almost all of each week’s paycheck within 10 days. When she did have a little extra cash, she usually spent it on her children within a few weeks. As with many households in our study, Amy was caught between seeking financial stability and mobility. Despite Amy’s struggles, she was trying to better her situation. Amy’s major financial choices are difficult to evaluate without knowing what the outcomes ultimately were.
US Financial Diaries Household Profile: Thriving but Still Vulnerable in the U.S.
Mateo Valencia, 31, and Lucia Benitez, 30, are an unmarried couple living in Queens with their four- year-old son Pablo. The family lives in a three-bedroom, one- bathroom townhouse, and they rent out rooms to friends and relatives who are between homes or jobs. They both moved to the U.S. in 2005 from Ecuador. Mateo and Lucia are in many ways emblematic of the American immigrant experience. They came to the U.S. with hopes of building a better life and while they are not truly secure yet, they are finding opportunities.
US Financial Diaries Household Profile: Budgeting for a Year with Lumpy Income
Sandra Young, 52, is an African American woman living in Brooklyn with her grown children: Tyler, 25, and Kayla, 24. Sandra manages several branches of a tax preparation agency, which means that she earns most of her income during the six months between November and April. Sandra illustrates the depth of the retirement savings challenge: behavioral science and nudges to encourage saving for the future over spending for the present are invaluable, but may not be nearly enough to enable Americans to generate a secure retirement.
US Financial Diaries Household Profile: Getting By with Limited Resources
Lauren Walker, 29, is a single mother living with her four-year-old son Riley in a rented townhome in a small town in eastern Mississippi. Lauren works full time as an administrative assistant for a local construction and engineering firm, and she covers her frugal needs with her annual income. But the annual perspective hides months lived very close to the financial edge.
US Financial Diaries Household Profile: Getting By With Help from Friends
Rita Douglas, 62, lives in a two-bedroom apartment in a marginal, sometimes dangerous neighborhood near Cincinnati, OH. Rita lives her financial life closer to the edge than many Americans, so she experiences the ups and downs in her available resources more acutely. But the issues that she faces as she juggles her bills are, in fact, quite common, and the coping strategies that she employs to stretch her resources are often effective. Most notably, Rita dramatically improves her prospects by sharing with others.
US Financial Diaries Household Profile: Keeping Control by Relying on Cash
Mike Smith, a single man in his mid-50s, lives in a two-bedroom, one-bathroom house in Kentucky, in a small town near the Ohio River. This snapshot of Mike Smith’s financial life provides a window into many themes that arise repeatedly in the US Financial Diaries. Mike is “underbanked” but, like many, he is underbanked by choice. Looking at his finances it’s clear that he would benefit from using a wider set of financial products, and using the ones he already has more intensively. The underlying reason he is underbanked is that he seeks control and transparency in his finances – a goal that is shared by millions of Americans and that Mike simply demonstrates in an extreme version.
US Financial Diaries Household Profile: Relying on Erratic Income Sources
Tim and Clara Adrian are in their early 30’s and live in Mississippi in a four-bedroom house that they own. The Adrians’ financial life – like the rest of their life is full, busy and complicated. They use a range of financial products to facilitate saving, spending and borrowing, including a checking account, prepaid card, mortgage, store credit, 401(k) plan and cash. These products are effective at facilitating particular types of transactions, but they don’t fully leverage the strengths of this family. It is worth thinking about how innovative modifications to these products, or new financial vehicles entirely, could bolster the Adrians’ ability to manage both their day-to-day and long-term financial needs, increasing their financial health over time.
US Financial Diaries Household Profile: Adjusting to a New Life in the US
Ahmed and Shaila Hossain are immigrants from Bangladesh who moved in 2010 to Queens, NY, where there is a large Bangladeshi community. Stories of immigrant families like the Hossains are so much a part of the United States’ national self-image that it is easy to think that we already understand the narrative. And, indeed, there is much here that is consistent with the plotline that we already know. For example, the Hossains have taken several steps back – by taking on debt, and leaving educational credentials and close family behind – in hopes of taking more steps forward. However, there is also much in their story that illuminates our understanding not only of that experience, but also of the experience of millions of other Americans – both recent immigrants and others – who are trying to achieve greater financial prosperity in the face of income insecurity and volatility.
US Financial Diaries Household Profile: Extended Family Strives to Get Ahead
The Rodriguez family is a multigenerational household living in a small town near San Jose, California. Maria Rodriguez, 60 years old, lives with her husband Dean, 75; her mother, Regina, 83; and her two sons, Martin, 36, and Daniel, 34. The Rodriguez household’s financial health reflects a series of fortuitous circumstances and good but imperfect choices – many of which represent themes that are echoed throughout the US Financial Diaries.
In and Out of Poverty: Episodic Poverty and Income Volatility in the U.S. Financial Diaries (Working Paper)
We use data from the U.S. Financial Diaries study to relate episodic poverty to intra-year income volatility and to the availability of government transfers. The U.S. Financial Diaries data track a continuous year’s worth of month-to-month income for 235 low- and moderate-income households, each with at least one employed member, in four regions in the United States. The data provide an unusually granular view of household financial transactions, allowing the documentation of episodic poverty, and the attribution of a large share of it to fluctuations in earnings within jobs. For households with annual income greater than 150 percent of the poverty line, smoothing within-job income variability reduces the incidence of episodic poverty by roughly half. We decompose how month-to-month income volatility responds to receipt of eight types of public or private transfers. The transfers assist households mainly by raising the mean of income rather than by dampening intra-year income variability.
By Jonathan Morduch and Julie Siwicki
Income Gains and Month-to-Month Income Volatility: Household evidence from the US Financial Diaries (Working Paper)
The US Financial Diaries track the finances of a small sample of low and moderate-income households over a year. The households faced substantial swings in income from month to month. On average, they experienced 2.5 months when income fell more than 25 percent below average.
US Financial Diaries Issue Brief: Emergency Savings
Households should have at least three months of income set aside in emergency savings, according to standard financial literacy curricula. Most snapshot surveys of American households’ actual emergency savings paint a dire picture against this standard. Volatile incomes could explain some of the gap. The assumed “emergency” in emergency savings advice is usually the loss of a steady job, by implication an infrequent occurrence. But households in our survey experience smaller, more frequent, shortfalls in income. These smaller “emergencies” may require them to regularly draw down emergency savings.
US Financial Diaries Issue Brief: Savings Horizons
The US Financial Diaries methodology has two features that allow us to better understand household saving behavior. First, because we track flows into and out of accounts, not just balances at a single point-in-time, we are able to see saving activity over a year. As income and spending needs rise and fall, households save, draw down, and build up their savings again, leaving average balances that do not fully capture the extent of saving behavior. Second, because we followed households for a full year we have the opportunity to both discuss with households their expectations for the use of savings and track the actual uses of those savings. As a result, we gained new insight into how households thought about and used savings and how they used the variety of financial tools available.
US Financial Diaries: Informal Finance
Jonathan Morduch of the Financial Access Initiative, and Rachel Schneider of CFSI discuss the new report from the U.S. Financial Diaries Project. Households often use informal tools that are harder to see from outside, like short-term loans from friends or relatives.
NextBillion Interviews FAI's Timothy Ogden on USFD Project
Timothy Ogden, managing director of NYU's Financial Access Initiative discusses the U.S. Financial Diaries project, which tracked the financial activity of over 200 lower-income American households for a full year.
US Financial Diaries Issue Brief: An Invisible Finance Sector: How Households Use Financial Tools of Their Own Making
People run their financial lives with a variety of tools. The first tools that come to mind are likely to be formal, like checking accounts and credit cards. But households often use informal tools that are harder to see from outside, like short-term loans from friends or relatives. It’s tempting to think that these informal tools are last resorts, or second-best solutions, but informal financial mechanisms are often combined with formal tools, and sometimes are preferred. Among the families in the U.S. Financial Diaries (USFD), for instance, the use of informal loans was as common as the use of alternative financial services (e.g., payday loans, pawn shop loans), though the volumes transacted informally tended to be smaller. Understanding how these informal finance tools work, and why households use them, can offer new perspectives for financial services innovators and policy makers.
US Financial Diaries Issue Brief: Spikes and Dips: How Income Uncertainty Affects Households
When asked whether “financial stability” or “moving up the income ladder” is more important, 77% of the participants in the U.S. Financial Diaries (USFD) research study chose “financial stability.” This response illustrates the high level of financial uncertainty and unpredictability that these households face. Many factors contribute to feelings of financial instability: insufficient income, unpredictable expenses, a lack of savings, inadequate financial management, and reliance on complicated or poorly designed financial products and services. This research note focuses on how people earn and receive income.