Income Volatility, What’s That About?

By Lisa Gates

Director, Office of Financial Empowerment

Just as the weather has its unexpected ups and downs so can our income and financial situation.  Unexpected and unpredictable spikes and dips in income and finances over time is called “income volatility.”

Income volatility affects households at all income levels and can be due to such things as a loss of employment, changing jobs, divorce, loss of a spouse, changes in a number of working household members and irregular paychecks.  Residents of households who don’t know or aren’t confident what their paycheck might be six months or a year from now in a difficult position trying to figure out what they can spend today.  Families with unpredictable income will often find it difficult to follow traditional financial advice, such as how much house they can afford. Housing affordability calculators, for example, presume a steady income.

Families with fluctuating incomes can also face problems getting public benefits such as assistance from the federal Supplemental Nutrition Assistance Program (SNAP) and state Medicaid programs because eligibility is often determined by the family’s income over the previous three months — but that may not reflect what they’ll be making later in the year.

Income volatility is also considered a public health issue due to the stress that can come from a sudden drop in income.

So, what do we do?  We can’t control income volatility but we can try to be better prepared. I know I have said this many times in the past but I cannot over-emphasize the importance of having an emergency savings account. It’s never too late to start an emergency savings account and there’s no such thing as having too little to start saving for emergencies.  Always know that there are professionals that can assist you if you don’t know where to begin and guide you along the way.  And if they try to charge you a fee for their services, walk away.  These services and much more are always available to you for free.

For more information on FREE financial counseling and additional resources, contact our office at 314.622.4700 or visit our website at

For more information on our services and upcoming classes please call our Office of Financial Empowerment at 314-622-5669 or visit our website at

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